Responding to the global financial crisis
The global credit crunch has led to widespread debate and calls for regulatory reform. The University of Sydney has hosted major international figures to debate the issues – and its researchers are among those delivering the responses that governments seek.
A centre for debate
On 8 August 2008, the eve of the first anniversary of the global credit crunch, the Secretary-General of the Organisation for Economic Cooperation and Development (OECD) addressed leading figures from government, business and academia in the University of Sydney's Great Hall.
A year earlier the full extent of problems in financial markets had really started to hit home. Interbank lending had already slowed dramatically as banks increasingly refused to lend to each other, spooked by rising delinquencies in the US subprime mortgage market. The credit crunch ballooned into what is now dubbed the global financial crisis, slaying some of Wall Street's top names and pushing major economies into recession.
The OECD, which groups 30 top western economies, is one of the international bodies trying to develop solutions to the problem. Since becoming Secretary-General in June 2006, the Mexican-born Angel Gurría (pictured above) has reinforced the body as a hub for dialogue and debate on global economic policy issues.
His Sydney speech, part of the University's International Forum series, left the audience in no doubt that such international cooperation was much needed: climate change, water shortages, fuel prices, international trade liberalisation – not to forget the global financial crisis – all present a major challenge to stability and growth.
"We are witnessing a series of simultaneous structural transformations in the world economy that demand much better international coordination between governments, international organisations, business, NGOs and academia," Gurría told his audience. "Policymakers, regulators and oversight agencies should keep pace with the incredibly fast financial and technological change."
Delivering regulatory and technical solutions
Ten minutes walk from the Great Hall leads to the Faculty of Economics and Business, where renewed efforts are underway to support the coordination Gurría seeks. A network of PhD students has spread across the world to work with industry partners to examine the causes of the financial crisis and ensure similar problems don't occur in the future.
The students are part of the PhD program run by Capital Markets CRC (CMCRC), one of around 50 government-backed Cooperative Research Centres that bring together businesses and researchers. Led by Professor of Finance Alex Frino, the centre was formed in 2001 and reconstituted in 2007 after winning a new round of government funding.
"We're a good example of how universities can help present solutions," says Frino, an 18-year veteran of the University and chief executive of CMCRC. "Everyone has been affected by the financial crisis in some way and we're trying to safeguard Australia's critical financial assets through research that enhances the quality of markets and their integrity."
"We're trying to provide input so that sensible policy responses can be made in light of the crisis, so hopefully it won’t happen again," says Frino (pictured above with some of his research students).
2008 was a landmark year for CMCRC, which groups the four Sydney-based universities with 17 industry partners and the federal and NSW governments. It sent PhD students on overseas placements for the first time, and launched a program to develop world-first technology that would allow exchanges around the world to share information and detect illegal manipulation of financial markets.
The prototype technology represents a major advance as it can detect when someone is manipulating the market in one country to buy or sell at an advantage in another, something which was previously not possible.
Students working at the London Stock Exchange (LSE) have had their research referred to in the Financial Times, while students working in Asia have informed work at exchanges and regulators alike. "Their independent research has provided valuable insights into the operation of markets," says Thomas Tey, Head of Product Management at the Singapore Exchange.
While the CMCRC and host regulators and exchanges benefit from new research, students gain a valuable new perspective.
The CMCRC's global placement of researchers reflects the global nature of markets, benefiting regulators, the University, and our students. No doubt Angel Gurría would approve.
"Gone are the days when countries could solve their problems in isolation," he told the University's International Forum. "Human progress is more and more dependent on international cooperation. It is increasingly difficult to solve, in fact, practically any single issue in a vacuum. Issues have become multi-dimensional. Global issues require global answers."