Banks on the Brink
Global Capital, Securities Markets, and the Political Roots of Financial Crises

International capital flow and domestic financial market structures explain why some countries are more vulnerable to banking crises.

Mark Copelovitch (Author), David A. Singer (Author)

9781108489881, Cambridge University Press

Hardback, published 20 February 2020

252 pages, 42 b/w illus.
23.5 x 15.9 x 1.9 cm, 0.49 kg

'This book compares the two designs and focuses on financial market disintermediation and the importance of cross-border capital flows to explain the degree of financial instability in the two countries. Key lessons (and a few surprises) are drawn from the two cases for policy initiatives to contain damaging instability at tolerable costs to financial efficiency and innovation.' I. Walter, Choice

This innovative analysis investigates a complex issue of tremendous economic and political importance: what makes some countries vulnerable to banking crises, while others emerge unscathed? Banks on the Brink explains why some countries are more vulnerable to banking crises than others. Copelovitch and Singer highlight the effects of two variables in combination: foreign capital inflows and the relative prominence of securities markets in the domestic financial system. Foreign capital is the fuel for banks' potentially dangerous behavior, and banks are more likely to take on excessive risks when operating in a financial system with large securities markets. The book analyzes over thirty years of data and provides historical case studies of two key countries, Canada and Germany, each of which explores how political decisions in the 19th and early-20th centuries continue to affect financial stability today. The analyses in this book have crucial policy implications, identifying potential regulations and policies that can work to protect banking systems against future crises.

1. The politics and economics of financial instability
2. Banking crises, capital flows, and financial market structure
3. Capital inflows, market structure, and banking crises: empirical evidence
4. O Canada? Unraveling the mystery of Canadian bank stability
5. Finanzplatz Deutschland: German bank stability and its decline
6. Policy responses: what to do (and not to do) about financial instability.

Subject Areas: International economic & trade law [LBBM], Economic history [KCZ], Economic & financial crises & disasters [KCX], Political economy [KCP], Economics, finance, business & management [K], Comparative politics [JPB]