Links summer 2021

Green and ethical banks in Europe

European banks with an explicitly green or sustainable profile:

Ethical banks:

See also:

Febea (European Federation of Ethical and Alternative Banks and Financiers)
GABV (Global Alliance for Banking on Values)

Banking on YouTube

I’m trying something new. I’ve started making videos about banking, monetary policy and sustainable finance.

I’m still trying to figure out the best format. But I already like the ability to use graphs and pictures. Compared to blogging, video is less nuanced. For example, you can’t link to all sources. But maybe that’s an advantage.

Here’s the first one, let me know what you think!

Is climate change the job of central banks?

Background literature:

  • Conny Olovsson (Riksbank) argues that “monetary policy does not have the appropriate tools for counteracting global warming, but global fiscal policy is significantly better suited for this purpose.”
  • Isabel Schnabel (ECB) argues that climate risks are mispriced by financial markets. Central banks should not sustain market failures.
  • The fraction of bonds issued by carbon intensive companies in the ECB’s CSPP portfolio and accepted as collateral is far larger than the GVA of these companies, see e.g. Matikainen (figure 3) or Dafermos (figure 4).
  • Paris Agreement, Article 2, 1(c): This Agreement, in enhancing the implementation of the Convention, including its objective, aims to strengthen the global response to the threat of climate change, in the context of sustainable development and efforts to eradicate poverty, including by: Making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development.
  • The European Green Deal is a priority of the European Commission.
  • Lagarde has said climate change is the job of the ECB: “[w]hether climate change (…) is to be considered as part of our primary objective. And the answer is yes.” (1:44)
  • A green mandate for the ECB? Dirk Schoenmaker says yes, Hans Peter Grüner says no.

2016-2021

I started this blog in 2016. I wanted to publish short pieces while I was writing Bankers are people, too and build an audience for the book.

A lot has changed since then.

In the first years, I tried to post at least once a week about topics ranging from economic history to personal finance. Currently, I write almost exclusively about banks and monetary policy. I have lost interest in faits divers such as Gamestop, lumber, dogecoin… My style has also changed. I now mainly use this blog as my personal wikipedia. Well-polished articles don’t offer enough reward for the work it takes to write them.

Looking back, what should I have done differently?

  • Use video instead of text
  • Don’t waste time on ideologues
  • More coverage of innovative1 topics such as blockchain and ESG

That said, I’m glad that I met new friends and found jobs thanks to this blog.

Central bank mandates

In their paper Against amnesia: re-imagining central banking, Benjamin Braun and Leah Downey describe the elite consensus on central banking as a ‘holy trinity’. This holy trinity consists of (1) an independent central bank that (2) sets the short term interest rate to (3) achieve stable prices1.

The fact that quantitative easing (QE) is still often called unconventional monetary policy speaks volumes for how deeply the holy trinity is ingrained in the minds of the community. However, more and more people are questioning this model of central banking2.

Central bankers are almost begging politicians to spend more. A formal framework for fiscal and monetary coordination would do away with the fiction3 of central bank independence.

There’s an explosion of ideas for new instruments, from yield curve control to canceling debt to green TLTROs.

While almost nobody wants to ditch price stability, central bankers are taking on extra responsabilities based on local sensitivities. European central bankers (both at the ECB and the Bank of England) are making their institutions climate friendly. The Federal Reserve has had a dual mandate of price stability and full employment for a long time. The Reserve Bank of New Zealand will take house prices into account.

Although central banking post-holy trinity will have its own challenges, I, for one, welcome our central bank overlords.