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This paper presents a detailed historical account of the Bank of Twente (Twentsche Bankvereeniging), launched in 1861 and, for most of the subsequent decades, the largest, fastest-growing, and most profitable bank in the Netherlands. It follows the narrative analysis approach to illustrate that the circumscribed use of a limited partnership was rooted in the organizational form having a flaw of its own that, under particular circumstances, created serious agency costs. As the bank grew, so did the agency costs, finally forcing the bank to incorporate in 1917.
Drawing on the history of the Bank of Naples, this article sheds new light on the power struggle between the central government and the Southern elites in Risorgimento Italy. Since unification, the Bank has been portrayed as the archetypal victim of a predatory (Northern) Italian government. This article, by deconstructing the myth surrounding the Bank, shows how this characterisation was carefully crafted by its Neapolitan management. Exploiting to the fullest the new political and economic role they had acquired under the aegis of a constitutional government, the Bank's governors appropriated and invested with new meanings Risorgimento ideals to further the Bank's cause as well as their own. Constantly shifting the focus from finance to politics, they posed as champions of those municipal, regional or even national liberties the government was either unable or unwilling to defend. This narrative provided an ideological smokescreen obscuring the economic and partly private nature of the confrontation between the central government and the Bank, and reinforced the view of a South victimised by the new Italian state still in currency today.
Joseph Brennan, as secretary of the Irish Department of Finance (1923–7) and chair of the Irish Currency Commission (1927–43), was a pivotal influence on Irish banking and currency affairs. Yet, within the existing literature, his adherence to conservative British norms is seen as providing a ‘bleak prescription’ for the Irish economy. However, such a view ignores the fact that Brennan was far from dogmatic on banking and currency issues and underplays his incrementalist, and often internationalist, approach to the development of Irish monetary institutions. Brennan's actions up to the early 1940s were based on the realities of Ireland's slowly receding economic and intellectual dependency on Britain, a ‘dependency’ often misrepresented in the existing literature as a more primitive, pre-Keynesian, conservative approach. However, rather than acting as a restraining influence on Irish economic development, the policies Brennan advocated enabled Ireland to avoid the instability associated with many smaller, emerging nation states in the 1920s and 1930s. The focus on continuity – which guaranteed currency and banking stability – represented the realities of Ireland's reliance on the sluggish British economy in the decades after independence. Brennan's achievement, in helping to sustain banking and currency stability notwithstanding economic uncertainty, a fragile political environment (and suspicious banking interests), deserves wider acknowledgement.
The concluding chapter discusses limitations to the property rights paradigm. Neoliberal property rights are not a cure-all for rural development. There is an emerging consensus from the United Nations, World Bank, and FAO on the need for more context-specific property rights and international guidelines on how to respect, record, and strengthen such rights, especially customary rights. The conclusion then shows how the book’s theory speaks to the broader relationship between politics and markets beyond land and redistribution. States can generate new markets or enable the rise of markets, or new markets can arise organically. A government can then choose whether, and how, to delineate and protect property rights in those markets. Like with property rights in land, a country’s political institutions (democracy vs. dictatorship) as well as government coalitional dynamics (between elite factions and citizens) and foreign pressure determine property rights regimes. The conclusion applies to the evolution of subsoil property rights over oil in Mexico, subsoil mining rights for mineral natural resources in the United States, and property rights in the banking sector in Venezuela.
One of the major political narratives in the build-up to the critical parliamentary election of 2010 in Hungary was related to the “government of bankers.” Pre-2010 governments earned this label by the opposition based on their supposed close relationship with banking interests and for purportedly formulating financial and tax policy according to the needs of major financial institutions. In this article, we examine the preference attainment of the Hungarian Banking Association, the pre-eminent interest group in banking, and that of OTP, the biggest bank in Hungary, in order to evaluate this popular claim. The article addresses this challenge by comparing the policy influence of Hungarian Banking Association and OTP in the government cycles ending and starting in 2010. We adopt a computer-assisted qualitative content analysis framework and juxtapose the policy positions of the interest group in their formal communications with actual legislation related to the same issues. Results show that the general preference attainment of the banking lobby on major policy issues decreased after 2010—nevertheless, seismic activity was already under way after 2006.
This chapter studies the operation of trust on financial markets in the North Indian city of Banaras (Varanasi). It emphasizes an interpretation of trust on markets as an artifact and artifice based on an experiential category of practical knowledge used to handle exchange under conditions of high uncertainty, and identifies two distinct patterns in its handling, marked as procedural and reputational registers of (handling) trust. The first case analyzes the difficulties faced by locally operating banks in the mid-twentieth century to shift from reputational to procedural registers of handling trust, using banking advertisements and other archived material. The second case outlines the shifts in the manner reputational registers of trust are used in extra-legal money lending in the wake of Indian legislation against these financial practices, contrasting an ethnographic study of contemporary practices to historical sources on money lending in the first half of the twentieth century.
This article rethinks the relationship between trade and industry in the development of Indian capitalism, focusing on Tata, pioneers in textile and steel production. It shows how two little-known affiliated trading companies, R.D. Tata & Co. in Shanghai, Hong Kong, and Kobe, and Tata Limited in London, played a crucial intermediary role in securing financing and market access for the parent firm in Bombay while simultaneously increasing its exposure to the effects of global crises. Tata's ultimately dominant position in a protected national economy was due to the contingent failure of these trading companies rather than a foregone conclusion.
This chapter provides an introduction to economic crises. It describes a number of different types of crises and defines both contagion and systemic risk. It analyzes balance of payments and currency crises, the Asian crisis, and the global financial crisis. It takes up the potential roles of prudential regulation and currency controls in helping to prevent crises.
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.
It is a commonplace to state that we live in a time of continuous change. But that doesn’t make it any less true. The force and impact of change become all the more obvious when considering a horizon that spans two generations. Fifty years ago, a mere handful of advanced industrial economies dominated the global economy. Since then, a wide array of countries have emerged as new economic powerhouses. Economic development and prosperity are now more equally spread across the globe than at any other time over at least the past two centuries.
Written for undergraduate and graduate students of finance, economics and business, the fourth edition of Financial Markets and Institutions provides a fresh analysis of the European financial system. Combining theory, data and policy, this successful textbook examines and explains financial markets, financial infrastructures, financial institutions, and the challenges of financial supervision and competition policy. The fourth edition features not only greater discussion of the financial and euro crises and post-crisis reforms, but also new market developments like FinTech, blockchain, cryptocurrencies and shadow banking. On the policy side, new material covers unconventional monetary policies, the Banking Union, the Capital Markets Union, Brexit, the Basel III capital adequacy framework for banking supervision and macroprudential policies. The new edition also features wider international coverage, with greater emphasis on comparisons with countries outside the European Union, including the United States, China and Japan.
This paper highlights how international organizations can use Global Performance Indicators (GPIs) to drive policy change through transnational market pressure. When international organizations are credible assessors of state policy, and when monitored countries compete for market resources, GPIs transmit information about country risk and stabilize market expectations. Under these conditions, banks and investors may restrict access to capital in non-compliant states and incentivize increased compliance. I demonstrate this market-enforcement mechanism through an analysis of the Financial Action Task Force (FATF), an intergovernmental body that issues non-binding recommendations to combat money laundering and the financing of terrorism. The FATF’s public listing of non-compliant jurisdictions has prompted international banks to move resources away from listed states and raised the costs of continued non-compliance, significantly increasing the number of states with laws criminalizing terrorist financing. This finding suggests a powerful pathway through which institutions influence domestic policy and highlights the power of GPIs in an age where information is a global currency.
This article traces the origin of too-big-to-fail policy in modern US banking to the bailout of the $1.2b Bank of the Commonwealth in 1972. It describes this bailout and those of subsequent banks through that of Continental Illinois in 1984. During this period, market concentration due to interstate banking restrictions is a factor in most of the bailouts and systemic risk concerns were raised to justify the bailouts of surprisingly small banks. Finally, most of the bailouts in this period relied on the Federal Deposit Insurance Corporation's use of the Essentiality Doctrine and Federal Reserve lending. A discussion of this doctrine is used to illustrate how legal constraints on regulators may become less constraining over time.
Some Roman economic historians are skeptical of an economic rationality which explicitly imposes capitalism-centric value judgements on antiquity. Should Roman historians study rationality as a phenomenon exclusively ‘locked’ inside the minds of individuals, or is it possible to study rationality as something at least influenced or even determined by collectivized social and cultural structures (or embedding contexts)? In this chapter, I argue that Collingwood’s observation that observers and subjects share the same cognitive process opens up new opportunities for understanding the thinking of ancient peoples. First, I define this cognitive process, after Weber and especially Mises, as ‘purposefulness’ and defend its a priori epistemological status. Then, using Weber’s insights on ideal types, I discuss how embedding contexts bounded purposefulness. Finally, I combine these arguments into an experimental heuristic model for understanding the purposeful actions of historical individuals by comparing these choices to both ideal-typical economic theory and unchosen counterfactual actions.
William H. Williams arrived in Washington, D.C., and set up his own, independent slave–trading operations in the mid–1830s, shortly before the Panic of 1837 brought an abrupt end to the "flush times" of the preceding years. Slave narratives and travelers’ accounts document the visibility of Williams’ slave pen, dubbed the Yellow House, and the horrors experienced by those held captive inside.
Looking across the long twentieth century, this article tracks the rise and fall of one form of anti-competition regulation: the certificate of public convenience. Designed to curb “destructive competition” in certain industries, such as transportation and banking, certificate laws prevented firms from entering those industries unless they could convince regulators that they would satisfy an unmet public demand for goods or services. This history highlights how lawmakers used similar techniques in governing infrastructure and finance—two fields that are not often studied together. It also shows that state regulation both prefigured legal change at the federal level and then lagged behind it, suggesting that different dynamics have been in play at each level of governance in devising competition policy over the last century.
Pope Pius XII has been identified as the final pope of the “Modern” or “Leonine” school of social thought, stemming from the time of Pope Leo XIII. Key components of thjis school include support for political democracy, support of workers’ rights, support for moderate social welfare policies, and encouragement of lay movements like Catholic Action. These strategies were combined with a philosophical and theological emphasis on Natural Law, a communitarian vision of the human person, and a hierarchical understanding of church and society. Pope Pius XII brought these teachings to the laity in an effort to promote human welfare. Through the principle of subsidiarity, he offered resistance to totalitarian governments, and most importantly, he defended the family as society’s foundational cell, the “natural nursery and school where the man of tomorrow grows up and is formed.” He continued the Vatican practice of forming alliances with democratic nations, but under Pius the Church formed a much closer alliance with the United States. In so doing this, he largely repudiated the so-called “phantom heresy” of Americanism.
Modern Catholic social teaching, especially as articulated by the popes, the curia, and the bishops, has said little directly and formally about systems of finance. Where these voices have spoken, they have encouraged sound practices in broad outline and criticized obviously unsound and immoral behaviors. Unfortunately, their own financial management practices have not offered good models for what might be done. Nevertheless, key concepts like the logic of gift, the idea of solidarity and the common good, and the vision of integral human development, coupled with the competence and integrity of Catholics working in systems of finance, can imagine possibilities and generate inspiring models of professional conduct. The key to making this work well is to understand and embrace the possibility of pursuing work in the system of finance as a genuine Christian vocation that in its own way genuinely addresses human needs and helps to build the Kingdom of God. In service of this, the pastors of the Church at every level can and should affirm this profession as a vocation, encourage Catholics to bring their faith to their work, avoid unnecessary criticism of business practices, and assist business professionals to see more clearly the challenges and possibilities they face.
This chapter is an analytical summary of Rerum novarum. Its goal is to illuminate the purpose of the encyclical and the main lines of Pope Leo’s reasoning, his key premises and central ethical conclusions, and in this way, to articulate as clearly as possible the teaching that comprises Rerum novarum. Rerum’s influence on Catholic teaching and practice is most manifest in the Church’s “social teaching,” which in various ways identifies the encyclical as its founding statement. This identification is made in the names and citations of some of the most important papal contributions to Catholic Social Teaching (CST) and is pervasive throughout the corpus of CST. And it is revealed in the ways in which the accepted principles of CST are present or anticipated in Rerum novarum. Although the chapter does not undertake the large and formidable task of characterizing CST, it does indicate how these principles figure in Pope Leo’s analysis. It also underlines the extent to which these principles are not the main point of Rerum novarum, but stand in the service of the moral and religious reform urged by Pope Leo.
The common good (bonum commune) has, since antiquity, referred to the aim of social and political association, and was particularly prominent in medieval Christian political theology. Since St. John XXIII’s 1961 encyclical letter, Mater et magistra, ecclesiastical statements about social teaching have employed a formulation of the common good, usually in the version that appeared in the Second Vatican Council’s 1965 Pastoral Constitution for the Church in the Modern World, Gaudium et spes, as “the sum of those conditions of social life that allow social groups and their individual members relatively thorough and ready access to their own fulfillment.” This chapter discusses the origins and development of this formulation as well as the ways that it has been used in subsequent Catholic Social Teaching. While it has sometimes been interpreted as an “instrumental” account of the common good, the sources and uses of the notion suggest that it is the particularly modern political component of a fuller notion of the common good continuous with the tradition. In particular, the recent formulation is concerned to limit the power of the modern state and protect the dignity of the human person in the challenging conditions of political modernity.