G01 - Financial CrisesReturn

This paper examines the time-varying conditional correlations of daily European equity market returns during the Irish sovereign debt crisis. A dynamic conditional correlation (DCC) multivariate GARCH model is used to estimate to what extent the collapse of Irish equity markets and subsequent troika intervention in Ireland spilled over upon European equity markets during this crisis. During the Irish financial crisis from 2007 to 2010, strong contagion effects are uncovered between Irish equity markets and the investigated European equity markets. The contagion effects are found to ease dramatically in the period after troika intervention in Irish finances. This result supports the use of bailouts and external financial intervention as a mechanism to mitigate and absorb contagion associated with state-specific financial crises and if possible, should be considered as a primary response function in future cases of sovereign debt crisis.

As liquidity problems of some banks during global financial crisis reemphasized, liquidity is very important for functioning of financial markets and the banking sector. The aim of this paper is therefore to evaluate comprehensively the liquidity positions of Polish commercial banks via five different liquidity ratios in the period of 2001- 2011 and to find out whether the strategy for liquidity management differs by the size of the bank. The results enable us to conclude that liquidity of Polish banks has decreased in recent years, partly as a result of higher lending activity but mainly due to the financial crisis. Almost all Polish banks are sensitive to potential massive deposit withdrawals. Only some banks finance their lending activity by deposits; most banks are dependent on other sources of finance. Large and medium sized banks rely on the interbank market or on a liquidity assistance of the Lender of Last Resort, small banks hold buffer of liquid assets.

This paper describes the major issues in the clearing of over-the-counter (OTC) derivatives and the current regulative initiatives aimed at removing the market opaqueness. The core of the paper is the comparison of the US Dodd-Frank Wall Street Reform and Consumer Protection Act and the European Market Infrastructure Regulation (EMIR). The similarities and the major differences of these two regulative approaches are emphasized. The major similarities between EMIR and the Dodd-Frank Act relate to the mandatory clearing for standardized contracts, the scope of the derivatives covered, the exemptions from clearing for end-users and the reporting of cleared and uncleared derivative transactions by nearly all financial counterparties. The major differences arise with the restrictions on bank proprietary trading, with separation of derivative trading activities from commercial banking activities, with central counterparties (CCP) ownership rules and with the establishment of mandatory exchange trading requirement.

The aim of this paper is to clarify the problems of microfinance and the sustainability of microfinance institutions (MFI) in financial crisis. We find, that MFIs are often considered as one of the most effective and flexible strategies in the fight against global poverty. Due to several often unsolvable problems obstructing the easier and faster development of these institutions such as: ethnical problems, managerial resources, legal recourses, unfortunate recourses and other, the operations of MFIs are often not sufficiently efficient. The microfinance sector is in general known for its adaptability and quite healthy survival of past financial crises. However, current global financial crisis is testing the resilience of MFIs hardly. The MFIs are much more connected to international financial markets now than it was the case during previous crises. Therefore we expect that they will not survive the crisis without bearing some loses. But the expected losses are relatively smaller when compared to other financial institutions.