MICHEL AGLIETTA

Floating European football clubs in the stock market

Michel Aglietta, Wladimir Andreff, Bastien Drut

Résumé

Since the first initial public offering of a European football (soccer) club in 1983, more than forty other clubs have experienced a venture in the stock market. In this paper, it is investigated how much relevant and successful these experiences of listing and floating football clubs at the stock exchange have been. First, by showing that investing in the Dow Jones StoXX Football index is of little attractiveness in the perspective of an investor's efficient overall asset allocation. Then in examining the determinants of a football club's fair value and the relationship between stock performances and sporting results. Finally, an approach (alternative to the Anglo-American model of capitalism) of corporate governance, based on the concept of a soft budget constraint, is applied to European football clubs taking stake of their lasting financial deficits and debts. This alternative theoretical approach paves the way for an empirical testing of a vicious circle between negotiating higher TV rights revenues and player wage inflation.

Mot(s) clé(s)

A systemic approach to financial regulation: a European perspective

Michel Aglietta, Laurence Scialom

Résumé

The global financial crisis has pinpointed the relevance and the virulence of systemic risk in modern innovative finance. It is grounded in the propensity of credit markets to drift to extremes in close correlation with asset price spikes and slumps. In turn, such a propensity is nurtured by the heuristic behaviour of market participants under severe uncertainty. While plagued by disaster myopia, market participants spread systemic risk. Such adverse conditions have been magnified by financial innovations that have made finance predatory and capable of capturing regulators to annihilate prudential policies. Malfunctioning in finance is so deep and disorders are so widespread that sweeping reforms are the order of the day, if financial stability is viewed as a primary public concern. In this paper we argue that macro prudential policy should be the linchpin of relevant reforms. Being a top-down approach, it impinges both upon monetary policy and micro prudential policy. Central banks should pursue a dual objective of price and financial stability. Bank supervisors should broaden their oversight on a much larger perimeter, encompassing all systematically important institutions. Counter cyclical capital provisions should be required and linked to the control of aggregate credit supply. Leveraged institutions without deposit base should be subject to incentives for a much stricter liquidity management. To stem regulatory capture, prompt corrective action should be enlarged in its scope and adapted to mark-to-market financial intermediaries. Implementing macro prudential policy entails institutional changes. Central banks, bank supervisors and other financial regulators need to work much closer than beforehand, because the spread of systemic risk is not deterred by institutional and geographical frontiers. The changes to make are particularly stringent in Europe, where national parochialism makes the resolution of orderly cross-border bank crisis all but impossible.

Mot(s) clé(s)

The Crux of the Matter: Ratings and Credit Risk Valuation at the heart of the Structured Finance Crisis

Michel Aglietta, Ludovic Moreau, Adrian Roche

Résumé

La crise mondiale du crédit de 2007/2008 a pour origine l'opacité relative aux opérations de titrisation. En expliquant comment mesurer le risque des produits structurés, on montre que l'autonomie d'évaluation des investisseurs passe par une connaissance précise et en continu des éléments du pool sous-jacent. Une forme de démission sur ce point a amené l'industrie des notations à jouer un rôle central dans l'intermédiation financière de la titrisation. Ainsi, au coeur de la crise, la volatilité historiquement anormale des notes a eu un écho sans précédent. En introduisant une perspective théorique sur les dynamiques de la finance de marché, on met en avant le rôle clé des banquiers d'investissement dans la phase euphorique ayant précédé le retournement actuel et on montre que s'en remettre à la discipline de marché était naïf voire coupable. Vecteur privilégié de cette discipline, la notation a reçu son lot de critiques qu'il s'agit de dépasser pour penser l'harmonisation et la systématisation d'une activité de contrôle après émission des crédits structurés: la réforme de l'industrie de la notation est à envisager sous cet angle.

Mot(s) clé(s)

crise financière, risque de crédit, agences de notation

Permanence and innovation in central banking policy for financial stability

Michel Aglietta, Laurence Scialom

Résumé

In the first part of this paperer, we emphasize the adaptability and continuity of the lender-of-last-resort doctrine beyond the diversity of financial structures from the 19th century to the present day.. The second part deals with the global credit crisis and the analysis of the central banks' innovative practices during the 2007-2008 financial crisis. We highlight that the lender of last resort's role is not confined to providing emergency liquidity. It aims to provide orderly deleveraging in the financial system in order to preserve the financial intermediation process. Our conclusion underlines that the crisis management has become global and strategic. It opens the way to a major regulatory and supervisory reform.

Mot(s) clé(s)

lender of last resort, central banking, liquidity crisis

The regulation of hedge funds under the prism of the financial crisis

Michel Aglietta, Sandra Rigot

Résumé

This paper deals with two issues. On the one hand, it shows that structural changes in financial markets and in the hedge funds industry make the "light-touch" arguments for regulating hedge funds no longer relevant. On the other hand, pleas for stronger regulation of hedge funds are getting more attention. In the first part of the paper the huge expansion of the industry is outlined and the state of current regulation is highlighted. In the second part an in-depth analysis of risks associated with hedge funds is carried out. It is shown that systemic risk can arise from leverage and from concentration of exposures amongst hedge funds. The part played by hedge funds in the spread of the crisis of structured credit is portrayed. In the third section, the recommendations of professional organisations, regulatory authorities and international institutions are summed up within the framework of risk mapping. This oversight shows the ways of reform: the need of direct regulation, the enhancement of indirect regulation and the overhaul of securitization. The prospective pattern of regulation encompasses macro and micro issues, and impinges upon factors of demand and supply. It emphasizes the enhanced role of public regulators and displays the conditions of an effective market discipline performed by long run institutional investors.

Mot(s) clé(s)

financial leverage, prime brokers, securitization, extreme risks, systemic risk, opacity, long run institutional investors, due diligence, monitoring, disclosure, market discipline, public regulator