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In this paper, we present an electric-thermal drill with a novel design of a melting head that was developed within the EnEx-RANGE project. The design combines a short melting head with a large surface area of parabolic shape. It was succesfully tested in the laboratory as well as on Alpine glaciers (Langenferner and Mittelbergferner) and at the Ross Ice Shelf in Antarctica. In all these different environments, a high melting speed per specific power of typically 8.8 cm3 w−1 h−1 is achieved that is close to the ideal maximum bound of ~10.5–11.8 cm3 w−1 h−1 when neglecting all heat losses. It has also been demonstrated that the melting probe can be operated with typical equipment of small-scale field camps including a small power generator.
Against the backdrop of the 2007–2009 financial crisis, this chapter discusses the growing importance of macroprudential supervision. In contrast to microprudential supervision, which focuses on the soundness of individual institutions, macroprudential supervision focuses on the stability of the financial system as a whole and on monitoring and assessing so-called systemic risk. This is the risk of a breakdown of an entire financial system rather than the failure of individual parts. The chapter sets out the key features of the conceptual framework for macroprudential supervision. Next, macroprudential instruments are discussed. Finally, the chapter touches on the issue of crisis management and resolution, discussing the main instruments that can be considered in crisis situations.
The function of insurance is to protect individuals and firms from adverse events by pooling risks. Life insurance protects against the financial consequences of premature death, disability, and retirement. Non-life insurance protects against risks such as accidents, illness, theft, and fire. Insurance is a risky business, as insurance companies collect premiums and provide cover for adverse events that may or may not arise. The insurance business is plagued by asymmetric information problems. There is a moral hazard problem when the behaviour of the insured, which can be only partly observed by the insurer, may increase the likelihood that the insurer has to pay. After signing the contract, the insured may behave less cautiously because of the insurance. Another problem is adverse selection: high-risk individuals (for instance, ill people) may seek out more (health) insurance than low-risk persons. The final section of chapter describes the variation in insurance systems across Europe and analyses financial conglomerates that combine banking and insurance
The traditional business of banking is taking deposits and providing loans. Banks have a comparative advantage over other financial institutions in providing liquidity. They have also developed technologies to screen and monitor borrowers in order to reduce asymmetric information between the lender and the borrower. These liquidity-providing and monitoring functions also give banks a key role in modern capital market transactions. Risk is fundamental to the business of banking. Progress in information technology, combined with demands by supervisory authorities, has spurred the development of advanced risk management models. This, in turn, has prompted the centralisation and integration of some management functions such as risk management, treasury operations, compliance, and auditing. This integrated risk management method is designed to ensure a comprehensive and systematic approach to risk-related decisions throughout the banking group. Banks with an integrated risk management unit can exploit diversification opportunities at the group level. The Chapter ends by describing the European banking market, which is made up of 27 national banking systems.
The European Union (EU) has its origins in the European Coal and Steel Community (ECSC), which was formed by six European countries in 1951. Since then, it has grown to 27 members through the accession of new Member States, and has increased its powers by adding new policy areas to its remit. At the time of writing, the EU is negotiating the first exit of a Member State after a majority of the UK electorate voted to leaving the EU on 23 June 2016 in a process that has come to be known as Brexit. The chapter explains the functions of the most important EU institutions (European Commission, Council of the EU, European Council, the European Parliament, and the European Court of Justice) and legal instruments (including directives and regulations). It proceeds by outlining the process of monetary integration, from the agreement in principle in 1969, to the creation of an internal market, and the adoption of the euro in 1999 by 11 Member States. The final section discusses steps towards financial integration, including the Financial Services Action Plan, Banking Union and Capital Markets Union.
Financial crises have occurred repeatedly throughout history. This chapter starts by exploring the different types of crises: banking crises, sovereign debt crises, and currency crises. A banking crisis indicates that a significant part of a country’s banking sector has become insolvent after heavy investment losses, banking panics, or both. A sovereign debt crisis/default occurs when a government fails to meet interest or principal payments on its debt obligations. Finally, a currency crisis causes the value of a country’s currency to fall precipitously. The chapter provides facts and figures about financial crises, and discusses some theoretical models. A first set of models is related to the liability side of banks. Since banks use short-term deposits to finance long-term loans, they are vulnerable to massive withdrawals cumulating in a banking run. A second set of models looks at the asset side of banks. Shocks to fundamentals (e.g. a collapse in real estate prices or increased bankruptcies in the non-financial sector) can upset the business cycle, resulting in deteriorating asset quality that can trigger further banking problems.
This chapter discusses the causes and consequences of financial innovation. Financial innovation involves creating and popularising new financial instruments, as well as new financial technologies, institutions, and markets. There has been a recent increase in financial technology (FinTech), which combines changes in customer contact, for instance using mobile apps, with big data and new methodologies for handling the data. Competition, regulation and deregulation, and technological advances are important drivers of financial innovation. Competition stimulates financial institutions to develop new products and processes. Since regulation may forbid or otherwise restrain financial innovation, deregulation may spur innovation. Indeed, several innovations have been the result of attempts to circumvent regulation. And technological advances have made new instruments possible. While innovation can help foster growth and economic prosperity, some innovative financial instruments have been blamed for their role in the global financial crisis.
This chapter starts off by reviewing the three primary functions that financial markets perform. First, financial markets release information to aid the price discovery process. Second, markets provide a platform to trade. The main trading mechanisms, quote-driven and order-driven markets, are discussed. Finally, markets provide an infrastructure to settle trades. The remainder of the chapter provides a detailed description of the main financial markets in the EU (the money, bond, equity, derivatives, and foreign exchange markets).
This chapter begins by defining financial integration and identifying its drivers. Financial integration is a situation without frictions that discriminate between economic agents in their access to – and investment of – capital, particularly on the basis of their location. Market forces as well as collective action and public action drive financial integration. The second part of the chapter describes different methods of measuring the degree of financial integration, and distinguishes between price-based and quantity-based measures. The third part of the chapter gives an overview of the extent to which various financial markets in the EU are integrated. The financial crisis and the euro crisis represent serious setbacks for European financial integration. An important reason why the EU placed the creation of a single financial market and the Capital Markets Union high on the policy agenda is that it widely believed that financial integration would stimulate economic growth. The chapter concludes by discussing this growth effect and other consequences of financial integration.
This chapter discusses the EU’s payment and post-trading (i.e. securities clearing and settlement) systems. Over the past decade, the volume and value of transactions that are processed via these systems have grown tremendously. Stable and efficient payment and post-trading systems have become very important for the operation of financial markets and the economy in general. For a long time, these infrastructures were fragmented along national lines and were exposed to limited competition. But integration is continuing in the context of the single currency, the Single Euro Payments Area and technological innovations. The chapter starts by examining the different elements of (retail and wholesale) payment and post-trading systems. The second part of the chapter gives an overview of the economic features of the payment and securities market infrastructures. The third part of the chapter describes the current situation in the payment and post-trading industry and recent initiatives to promote further integration, and addresses weaknesses exposed by the financial crisis.
This chapter discusses the impact of institutional investors on the functioning of the financial system. Institutional investors are pooling funds and transferring economic resources to different asset classes and countries. They also transfer resources over time, and contribute to price discovery and thereby increase the efficiency of the financial system. In recent decades, the intermediation of financial assets has gradually shifted from banks to institutional investors such as pension funds, insurance companies, and mutual funds. During this process of re-intermediation, the assets of institutional investors of the EU-15 countries quadrupled from 49 per cent of GDP in 1990 to 223 per cent in 2017. This chapter provides an overview of the growth of institutional investors over the last three decades and documents the development of the main types of institutional investors.
This chapter provides a concise overview of European competition policy, with a focus on financial services. The chapter first defines competition and describes the objectives of EU competition policy, i.e. maintaining competitive markets and a single market in the EU. The ultimate goal of competition is to offer consumers a greater choice of products and services at lower prices (i.e. to enhance consumer welfare). The second part of the chapter analyses the economic rationale for competition policy by examining the difference between a perfectly competitive market and a monopoly. The third part of the chapter elaborates on the four tools of EU competition policy. The fourth part of the chapter discusses a framework for investigating the abuse of dominance