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11. Cyber Risk Scenarios, the Financial System, and Systemic Risk Assessment

Author:
Lincoln Kaffenberger and Emanuel Kopp
Publication Date:
09-2019
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
Cyber risk has become a key issue for stakeholders in the financial system. But its properties are still not precisely characterized and well understood. To help develop a better understanding, we discuss the properties of cyber risk and categorize various cyber risk scenarios. Furthermore, we present a conceptual framework for assessing systemic cyber risk to individual countries. This involves analyzing cyber risk exposures, assessing cybersecurity and preparedness capabilities, and identifying buffers available to absorb cyber risk–induced shocks.
Topic:
Science and Technology, Cybersecurity, Finance, Internet, and Risk
Political Geography:
Global Focus

12. Lessons Learned and Evolving Practices of the TIBER Framework for Resilience Testing in the Netherlands

Author:
Petra Hielkema and Raymond Kleijmeer
Publication Date:
10-2019
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
Financial institutions face an evolving threat landscape with a wide range of hostile actors targeting them. Regulators and consumers reasonably expect the institutions to make themselves more secure. The question then emerges as to whether financial institutions are complying with the different standards, rules, and regulations regarding their security. International standard-setting bodies have recognized the need to raise the bar higher for the resilience of financial institutions. The publication of the Committee on Payments and Market Infrastructures-International Organization of Securities Commissions (CPMI-IOSCO) guidance on cyber resilience in June 2016 has been pivotal in emphasizing the need to have an integrated approach for financial market infrastructures, with the institution’s board being ultimately responsible and accountable for cyber resilience.1 Increasingly, authorities and financial institutions alike recognize that, in addition to assessing the overall resilience posture of a financial institution against sophisticated attacks, it will be important to actually test this posture. The CPMI-IOSCO guidance includes a chapter dedicated to testing, containing several examples of activities to that end. Recently, frameworks for testing the resilience posture of institutions in practice have been developed internationally.
Topic:
Markets, Science and Technology, Finance, and Resilience
Political Geography:
Europe, Netherlands, and Global Focus

13. A Gendered Perspective on Changing Demographics: Implications for Labour, Financial and Digital Equity

Author:
Florencia Caro Sachetti, Gala Díaz Langou, and Fernando Filgueira
Publication Date:
03-2019
Content Type:
Special Report
Institution:
Center for the Implementation of Public Policies for Equity and Growth (CIPPEC)
Abstract:
The demographic transition has been one of the greatest phenomena affecting development worldwide and its effects on gender equity are undeniable. Lower fertility and ageing populations create both challenges and opportunities for gender equity, while women still face obstacles towards labour, financial and digital inclusion. G20 countries are at very different stages of the process, yet most have birth rates below replacement levels and population is ageing. Adopting a comprehensive and intersectional approach to women’s economic empowerment that contemplates age – and gender – specific rights, priorities and needs is crucial to both fulfilling women’s rights and facing the challenges associated with demographic change.
Topic:
Demographics, Gender Issues, Labor Issues, Inequality, Finance, Digital Economy, and Economic Development
Political Geography:
Global Focus

14. The Evolution and Current Status of De Facto Stare Decisis in International Trade and Investment Tribunals: How to Understand the Present by Looking into the Past

Author:
Chanya Punyakumpol
Publication Date:
02-2019
Content Type:
Working Paper
Institution:
Centre for Trade and Economic Integration, The Graduate Institute (IHEID)
Abstract:
Is there a doctrine of 'stare decisis' in international trade and international investment law? From a positive law perspective, the answer is a definite no. However, as many scholars have observed, in practice, there has been a strong level of deference from the Appellate Body to its previous rulings, but less so from investment tribunals. Using social network analysis to assess actual citations from the Appellate Body Reports and investment arbitrations from the inception to the current time, this paper examines the evolution and 'status quo' of citation networks in international trade and international investment arbitrations. It asks, not only whether there is a 'de facto' rule of precedent in the two regimes, but also when it occurs and how the development links with the institutional design of dispute settlement. The results show how the doctrine of 'stare decisis' diverges in international trade and international investment, as well as the importance of institutional design in shaping and constraining the behaviors of tribunals.
Topic:
Economics, Globalization, International Trade and Finance, Law, Finance, and Global Political Economy
Political Geography:
Global Focus

15. Does the Financial Action Task Force (FATF) Help or Hinder Financial Inclusion? A Study of FATF Mutual Evaluation Reports

Author:
Michael Pisa
Publication Date:
05-2019
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
As the organization responsible for setting international standards on anti-money laundering and countering the financing of terrorism (AML/CFT), the Financial Action Task Force (FATF) has encouraged countries to design measures that protect the integrity of the financial system and support financial inclusion. But it has also received criticism that poor implementation of its standards can undermine financial access. One of the FATF’s main tools for compelling effective use of its standards is the mutual evaluation process, which relies on peer reviews to assess countries’ level of compliance with the FATF Recommendations. We explore whether these reviews have been conducted in a way that helps or hinders national efforts to promote financial inclusion by reviewing the 33 developing country mutual evaluations that took place between 2015-2018. Overall, these findings suggest that assessment teams have conducted mutual evaluations in a way that supports efforts to promote financial inclusion and the flexible use of simplified measures. There is, however, inconsistency in how assessors treat risks emanating from financial exclusion, which suggests the need for a more systematic approach to evaluating these risks.
Topic:
Development, Terrorism, Finance, and Financial Integrity
Political Geography:
Global Focus

16. Public Financial Management and the Digitalization of Payments

Author:
Marco Cangiano, Alan Gelb, and Ruth Goodwin-Groen
Publication Date:
06-2019
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
The ability of digital payments to deliver better outcomes for governments, businesses, and individuals—including driving financial inclusion—has been one of the success stories of the digital age. Payments are central to how governments transfer and receive financial resources; however, the way such payments are made—and how they could be made more effectively—is often not mainstreamed in public financial management (PFM) despite the fact that many of the direct benefits from effective digitalization of payments are identitical to those traditionally expected from strong PFM systems.The digitalization of payments does not provide a silver bullet for solving PFM problems; therefore it needs to be approached in an integrated way, with strong leadership from central agencies, including the Ministry of Finance, to exploit the synergies between the many different types of payments facilitated by digital technology. The paper explores the linkages between the digitalization of payments and PFM, including through four case studies.
Topic:
Finance, Digitalization, and Financial Management
Political Geography:
Global Focus

17. Updating the DFIs’ Operating Models and Methods Towards Helping to Achieve the 2030 Agenda for Sustainable Development

Author:
Franque Grimard and Christian Novak
Publication Date:
12-2019
Content Type:
Policy Brief
Institution:
Institute for the Study of International Development, McGill University
Abstract:
Development financial institutions, especially their private sector windows, must play a more effective role in contributing to achieve the 2030 Agenda. In order to achieve such higher needed effectiveness, DFIs must update their operating models and methods, and the most recently launched DFIs, like FinDev Canada, must widely adopt a modernized approach towards development financing. In this regard, we recommend that DFIs: • Increase mobilization volumes of private capital. • Widen the offering of financial products and structures with high financial additionality. • Maximize their investment potential. We believe that the implementation of the specific recommendations presented in this Policy Brief would significantly contribute to the necessary actions to achieve the 2030 Agenda. However, accomplishing the SDGs is not only dependent on the adaptation of DFIs, but also on complementary effective actions from countries, the international financial system and the private sector, in addition to collaboration among all stakeholders.
Topic:
Development, United Nations, Finance, and Sustainable Development Goals
Political Geography:
Global Focus

18. Climate Change Disclosure of the Financial Sector

Author:
Zachary Folger-Laronde and Olaf Weber
Publication Date:
09-2018
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
As the impacts of climate change continue to grow in severity, focus has turned toward the climate change implications associated with the products and services of the financial sector. It is estimated that the indirect carbon emissions, which are caused in the financial sector by borrowers, investees and financed projects, are 50 to 200 times larger than the direct impacts of the financial sector. It is evident that a decarbonization strategy is needed for more than the fossil fuel industry and will require significant changes to most economic sectors. This added focus toward the financial sector has led to demands for enhanced disclosure of climate change information with regard to financed clients and projects. However, there remains limited guidance in how the financial sector should disclose its carbon performance to its shareholders and stakeholders. This paper reviews the highlights from an empirical study that investigated the types of carbon performance voluntarily disclosed by banks and the type of carbon impact emissions disclosed. Policy recommendations are made that aim to facilitate and standardize disclosures.
Topic:
Climate Change, Finance, Fossil Fuels, and Carbon Emissions
Political Geography:
Global Focus

19. The evolution of the EU law against criminal finance: the "hardening" of FATF standards within the EU

Author:
Leonardo Borlinia and Francesco Montanaro
Publication Date:
03-2018
Content Type:
Working Paper
Institution:
Centre for Trade and Economic Integration, The Graduate Institute (IHEID)
Abstract:
This article examines the recent evolution of the EU anti-money-laundering (AML) and counter-terrorist financing (CTF) legislative framework, focusing on the relationship between the main international standards in the field and the newest EU legislation. It suggests that international soft law norms—in particular, the Financial Action Task Force (FATF) Recommendations—have had a decisive influence on the latest development of legislation at the EU level and within its member states. It further argues that mainly the preventive component of the AML/CTF legislation will be strengthened by the EU instruments adopted in mid-2015. However, this Article concludes that the adoption of global soft standards has posed significant challenges to the EU legislative framework. The arguments are developed in four parts. The Article first highlights the main regulatory prescriptions that stem from the study of the phenomenology and the economics of AML/CTF regulation and underpin the current international regulatory paradigm. Second, it explores the evolution of the main international instruments in the field with a special focus on the role played by the FATF Recommendations. It also illustrates the relation between these instruments and the adoption of the new EU AML/CTF legislation from two different, but complementary, angles: (1) noting that the current international AML/CTF framework has a multidisciplinary approach, the Article focuses on the framework's repressive component and assessing the limits of the EU criminal approach against money laundering and terrorist financing; and (2) examining the recent EU preventive legislation and addressing the main challenges posed to the EU legislative framework when attempting to accommodate global standards, especially regarding tensions with fundamental freedoms and human rights protected within the EU.
Topic:
Corruption, Crime, Economics, International Trade and Finance, Law, Finance, and Global Political Economy
Political Geography:
Global Focus

20. Digital Fiat Currency, SDR and New Cross-Border Payment System

Author:
Liu Dongmin and Song Shuang
Publication Date:
03-2018
Content Type:
Policy Brief
Abstract:
Emerging economies have played more and more important roles in the world, and have become a significant drive in the reform of global financial governance to push it towards the direction of inclusiveness and resilience. As a key part of the international financial architecture, the dollarized cross-border payment system has not been changed correspondingly. Along with the rapid development of digital currency, the digital fiat currency (DFC) endorsed by national credit shows great potential in improving the current cross-border payment system. We propose that the new system based on DFC can be done in three patterns and the third one is most feasible: IMF-leading pattern, countries-leading pattern and the coexisting pattern. The new system will effectively reduce the transmission time and cost of cross-border payment services due to DFC’s peer-to-peer mode. Moreover, as the new system becomes more open, more flexible and more inclusive, all the developing countries will get fair and easy access to these services.
Topic:
Finance, Currency, and Economic Development
Political Geography:
China, Global Focus, and Global Markets