About the Brevan Howard Centre for Financial Analysis
The Brevan Howard Centre for Financial Analysis spearheads cutting-edge research in financial market behaviour.
The Centre dramatically enhances Imperial College Business School’s expertise in financial economics and strengthens ties with other disciplines including engineering and computational finance.
A key objective of the new initiative will be to disseminate rigorous, world-class research to reach and engage business practitioners, policy-makers, legislators and the wider public, as well as other academic experts. The new Centre will serve as a bridge between the Business School and the world of business, aiming to develop a greater understanding and more efficient management of risk, and to promote investment and productivity.
The mission statement of the Brevan Howard Centre reflects its wide ranging interests. It lays out three broad streams of research that the Centre hopes to promote:
Financial Stability and Financial Regulation The financial crisis of 2007-08 showed that supervision of individual banks (microprudential regulation) is not sufficient to guarantee the stability of the financial system. Systemic risk is also important and requires macroprudential measures that go beyond ensuring the safety of individual institutions.
Systemic risk is not well understood. Future research may show that the current focus on capital and liquidity regulation is inadequate. Among the topics that require further research are panics, asset price bubbles, contagion, deficiencies in the financial architecture, and foreign exchange mismatches.
Comparative Financial Systems and Designing New Financial Structures The importance of banking and financial markets differ from country to country. In the Eurozone for example, banks play a predominant role and bond markets and stock markets are less important. In the US, the reverse is true. What are the advantages and disadvantages of different financial systems? These issues were extensively discussed in the 1990s, but interest has since diminished. They are coming to the fore again with the development of the Eurozone and EU financial systems.
Another important aspect of financial structure is whether firms should be shareholder-oriented or stakeholder-oriented. Financial economists have done very little research in this area.
The current financial system is the result of historical accidents. The largest global banks have a size and complexity that their founders could not have imagined. Is this a case of “intelligent design” or is it due to market power and the luck of the survivors? In spite of popular unhappiness about the Too Big To Fail banks, the Globally Significantly Important Banks are larger than ever. In fact, their dominance has increased because regulators have built a wall around them that makes it difficult for other financial firms to compete. What should the new financial system look like? How should financial markets and institutions interact? These are questions that urgently need answers.
Financing Development, Environmental Protection, Medicines Most of financial economics has focused on the financing of firms and governments. However, many other types of finance contribute greatly to societal welfare. The success of China in the last three decades is well known but the role of finance in achieving this growth is not well understood. How exactly then has China’s growth miracle been financed and what are the lessons for other emerging economies? A significant area of our research will be to try and understand the operation of the Chinese financial system. Financial innovations have obtained some success in improving the environment and developing new medicines. However, these kinds of financial innovation are little studied. The Centre hopes to change this.