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Banking Essentials - Part I

This pathway will walk us through the basics of banks, starting with some of the different types and their main functions, then starting to look at the regulation faced by the banks, both before and after the Global Financial Crisis.

Greenwashing

Greenwashing is the act of distributing false information about something being more environmentally friendly than it actually is.

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Tackling the Cost of Living Crisis

In this video, Max discusses the cost-of-living crisis currently enveloping the UK. He examines its impact on households as well as the overall economy.

CSR and Sustainability in Financial Services

In the first video of this two-part video series, Elisa introduces us to sustainability. She begins by looking at the difference between sustainability and corporate social responsibility, two terms that can be easily confused.

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Banking Essentials - Part I

This pathway will walk us through the basics of banks, starting with some of the different types and their main functions, then starting to look at the regulation faced by the banks, both before and after the Global Financial Crisis.

Greenwashing

Greenwashing is the act of distributing false information about something being more environmentally friendly than it actually is.

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Plans & Membership

Our Platform

Expert led content

+1,000 expert presented, on-demand video modules

Learning analytics

Keep track of learning progress with our comprehensive data

Interactive learning

Engage with our video hotspots and knowledge check-ins

Testing & certification

Gain CPD / CPE credits and professional certification

Managed learning

Build, scale and manage your organisation’s learning

Integrations

Connect Finance Unlocked to your current platform

Featured Content

More featured content

Tackling the Cost of Living Crisis

In this video, Max discusses the cost-of-living crisis currently enveloping the UK. He examines its impact on households as well as the overall economy.

CSR and Sustainability in Financial Services

In the first video of this two-part video series, Elisa introduces us to sustainability. She begins by looking at the difference between sustainability and corporate social responsibility, two terms that can be easily confused.

More featured content

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What is the Sovereign Bank Doom Loop?

What is the Sovereign Bank Doom Loop?

Keith Mullin

35 years: Capital markets editorial

The sovereign bank doom loop has been one of the most discussed, analysed and researched topics since the Global Financial Crisis. In this second video of the series, Keith explains what is the sovereign bank doom loop, its impact, and what regulators are doing to try to mitigate this risk.

The sovereign bank doom loop has been one of the most discussed, analysed and researched topics since the Global Financial Crisis. In this second video of the series, Keith explains what is the sovereign bank doom loop, its impact, and what regulators are doing to try to mitigate this risk.

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What is the Sovereign Bank Doom Loop?

5 mins 39 secs

Key learning objectives:

  • Discuss the relationship between Banks and Sovereigns, and the consequent impact on the economy

  • Explain the improvements in Bank regulation to mitigate ‘SBDL’ and evaluate their success

  • Identify ways to potentially break the sovereign bank doom loop.

Overview:

This is the idea whereby Banks and Sovereigns are inseparably exposed to each other. This is seen through weak, over-indebted governments and their relationship to the solvency of their banks and vice versa. This concept was evident during the Global Financial Crisis.

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Summary

How can weak banks affect Government budgets?

Terminally weak banks can put a significant strain on and even threaten government budgets via:

  1. Costly bail outs
  2. Expensive fall outs

How can weak Governments affect Bank’s solvency?

Governments with unsustainable levels of debt, during times of market stress and loss of market confidence can:

  1. Have serious consequences for the strength of bank balance sheets
  2. Impede banks’ access to wholesale funding
  3. Cause a domino effect through the system
  4. Choke off the extension of bank credit into the economy, and slow economic growth.

In what ways have systemic risk factors been mitigated?

Improvements in Bank Regulation:

  • Banks must hold more capital
  • Maintain a buffer of HQLA
  • Maintain stable access to funding
  • Reduce leverage

Has regulation worked, and how can the Sovereign-Bank Doom Loop be broken?

Has it worked?

More stringent bank regulation has not solved the issue of banks with large exposures to the debt of their governments. In fact, HQLA definitions incentivise banks to hold the debt of their governments.

Recent reforms do not directly address the exposures of banks to sovereign risk, and eurozone banks have no regulatory incentive to manage their sovereign exposures prudently.

Can it be broken?

Potentially, by creating a multi-government eurozone debt security, it would reduce systemic risk and break the sovereign bank doom loop.

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Keith Mullin

Keith Mullin

Keith is the founder and director of KM Capital Markets, a media and thought-leadership consultancy. He spent the past 35 years working in specialist capital markets media and has had a ring-side seat at all of the major market events. Prior to setting up KM Capital Markets in 2017, Keith worked at Thomson Reuters.

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