Thorsten Beck, Robin Döttling, Thomas Lambert, Mathijs van Dijk, 02 July 2020

Banks fulfil several key functions in the economy, from improving the allocation of capital by extending credit to facilitating consumption smoothing through saving and borrowing. The creation of liquidity lies at the centre of much of a bank’s operations. This column provides evidence that banks' liquidity creation is associated with higher economic growth across countries and industries, with important non-linear effects. Results suggest that in the new ‘knowledge economy’ banks will have a more limited role, compared to other types of financial intermediaries and markets.

Elena Carletti, Stijn Claessens, Antonio Fatás, Xavier Vives, 18 June 2020

The Covid-19 pandemic has induced a deep global economic crisis. While so far banks have shown their resilience, partly thanks to major reforms after the crisis of 2007-2009, the crisis will put them under stress. Moreover, the traditional banking model was already being challenged pre-Covid by three trends: persistently low interest rates, enhanced regulation, and increased competition from shadow banks and digital entrants. This column introduces the second report in the Future of Banking series from the IESE Business School and CEPR, which provides a perspective on how the current crisis and these trends will shape the future of the banking sector.

Çağatay Bircan, Ralph De Haas, Helena Schweiger, Alexander Stepanov, 03 June 2020

As lockdown measures continue, or are relaxed only gradually, many small businesses continue to experience significantly reduced turnover. This column reports on a firm-level analysis across 16 emerging markets, and three Western European comparator countries, in order to gauge the potential risks associated with debt-driven COVID-19 support. The overall goal is to prevent a wave of bankruptcies that could break valuable relationships between firms and their suppliers and employees. However, liquidity support in the form of additional bank lending may create debt-overhang problems in the future and therefore requires careful targeting.

Anil Ari, Sophia Chen, Lev Ratnovski, 30 May 2020

Non-performing loans are a crucial policy consideration, especially in times of wider economic crisis. This article uses a new database covering 88 banking crises since 1990 to draw lessons for post-COVID-19 resolution of non-performing loans.  Compared to the 2008 crisis, the pandemic poses some different challenges. Despite some respite from the credit-crash of 2008, policymakers today are faced with substantially higher public debt, less profitable banks, and often weaker corporate sector conditions, making resolution of non-performing loans even more challenging.

Johannes Bubeck, Angela Maddaloni, José-Luis Peydró, 23 April 2020

The way that banks in the euro area react to negative central bank interest rates may be closely linked to their individual funding structure. This column suggests that they do not generally pass negative rates on to their depositors, and that they search for yield by investing in riskier securities. New evidence suggests that their investments are directed more towards securities issued by the private sector and securities denominated in dollars.

Rodrigo Coelho, Fernando Restoy, Raihan Zamil, 11 April 2020

Regulatory divergence in the banking sector, including differences in how jurisdictions apply Basel III and other regulatory standards, could be a significant source of market fragmentation. Unwarranted divergence in prudential requirements may discourage cross-border activities, international capital flows, and global risk-sharing. This column identifies three main sources of regulatory fragmentation in the post-Basel III era and proposes policy measures to reduce excessive discrepancies in the application of global banking rules. Maintaining trust in banks’ financial health is crucial in periods of economic and financial disruption – such as the COVID-19 pandemic.

Ozlem Akin, José M. Marín, José-Luis Peydró, 18 March 2020

There is a broad discussion surrounding the excessive risk-taking by banks and whether this constitutes a reliable early warning signal for future banking problems. This column presents evidence that many top executives of US banks sold their own shares in the buildup to the Global Crisis. This trends appears to be stronger for banks with higher real estate exposure, and weaker for independent directors or middle officers. Although the top bankers in riskier banks sold more shares, thus furthering their own interests, they did not reduce bank risk exposure.

Martin Hodula, 16 March 2020

The shadow banking system has become an important source of funding worldwide for the real economy over the last two decades. Europe is no exception, though research on shadow banking there has been relative scarce. This column shows that European shadow banking is highly procyclical, intertwined with insurance corporations and pension funds, and a terminal station for regulatory arbitrage. It also discusses the existence of two main motives that explain the growth of shadow banking, both prior and post-Global Crisis: a funding-cost motive and a search-for-yield motive. 

Iain Begg, David Miles, 10 January 2020

In 2020, the UK and the EU will try to strike a post-Brexit deal in financial services. At the SUERF conference in Amsterdam, David Miles and Iain Begg explain to Tim Phillips what's at stake in the negotiations, and who would suffer most if there's no deal.

Anat Admati, 06 December 2019

Anat Admati discusses what’s needed to get financial regulation that works.

Tara Rice, Kathryn Petralia, 24 September 2019

On 24 September the CEPR launched the latest Geneva Report on the world economy, called Banking disrupted? Financial intermediation in an era of transformational technology. Tim Phillips asks Tara Rice and Kathryn Petralia, two of the authors, whether fintechs and cryptocurrencies signal the beginning of the end for banks.

Kathryn Petralia, Thomas Philippon, Tara Rice, Nicolas Véron, 24 September 2019

FinTech and Big Tech firms are both increasingly stepping on banks’ traditional turf. This column introduces the 22nd Geneva Report on the World Economy, which looks at the challenges generated by new technology-enabled entrants to the global banking industry and the public authorities that oversee it. It argues that to respond adequately to the FinTech/Big Tech challenge, authorities will need to raise their game and enter uncharted territories.

Thorsten Beck, Consuelo Silva-Buston, Wolf Wagner, 04 September 2019

Following the Global Crisis, countries have significantly increased their efforts to cooperate on bank supervision, the prime example being the euro area’s Single Supervisory Mechanism. However, little is known about whether such cooperation helps improve the stability of the financial system. Using panel data for a large sample of cross-border banks, this column examines whether a higher incidence of supervisory cooperation is associated with higher bank stability. It finds that supervisory cooperation is effective, working through asset risk, but not for very large banks, which are the ones that pose the highest risk to financial stability.

Matthew Jaremski, David Wheelock, 15 August 2019

In response to the Global Crisis a decade ago, banks have tried to make themselves more resilient to shocks transmitted through interbank connections. But the opacity of interbank networks makes it difficult to measure the effectiveness of such policies. This column uses evidence from 20th century America to show how the founding of the Federal Reserve and the Great Depression affected interbank networks and lending practices. The creation of the Fed reduced network concentration and therefore contagion risk, but the system remained vulnerable to local panics.

Janine Aron, John Muellbauer, 07 May 2019

Mobile money has transformed the landscape of financial inclusion in developing and emerging market countries, leapfrogging the provision of formal banking services. This column explains how mobile money potentially helps ameliorate several areas of market failure in developing economies, including saving, insurance, and the empowerment of women. It illustrates these effects using examples from a burgeoning empirical literature and concludes that the system-wide effects of mobile money may be even greater than current studies suggest.

Sanjiv Das, Kris Mitchener, Angela Vossmeyer, 11 March 2019

The Global Crisis brought attention to how connections among financial institutions may make systems more prone to crises. Turning to a major financial crisis from the past, this column uses data from the Great Depression to study risk in the commercial banking network leading up to the crisis and how the network structure influenced the outcomes. It demonstrates that when the distribution of risk is more concentrated at the top of the system, as it was in 1929, fragility and the propensity for risk to spread increases.

,

Submissions are sought on the following themes:
• Digital currencies, fintech, and technology
• Regulation, markets, and financial intermediation
• International economics
• Macroeconomics, monetary policy, macrofinance, monetary policy frameworks, and communication
• Inflation dynamics
• Policy lessons from the history of finance and central banking
The deadline for submissions is Saturday, February 2nd.
The meeting commences on Thursday, July 18 at the FRB New York, featuring presentations by Nellie Liang and Jeremy C. Stein, and John C. Williams.
The 31 contributed sessions take place on Friday and Saturday, July 19-20 at the Kellogg Center, SIPA, Columbia University. Contributed sessions are organized by BIS, FSB, IMF, SNB, FRB St. Louis, Bank of Israel, FRB Cleveland, ECB, Riksbank, FRB San Francisco, Norges Bank, Bank of Spain, Bank of Japan, Bank of Canada, Bank of Korea, OeNB, FRB Minneapolis, Bundesbank, Central Bank of Ireland, SAFE, CEPR, ABFER, and IBRN.

João Granja, Christian Leuz, Raghuram Rajan, 04 December 2018

Risk taking was pervasive during the Global Crisis even in the most unlikely areas, such as stretching to lend at a distance. Using US data, this column examines the degree to which competition amongst lenders interacts with the cyclicality in lending standards using a simple and policy-relevant measure, the average physical distance of borrowers from banks’ branches. It finds that distances widen considerably when credit conditions are lax and shorten considerably when credit conditions become tighter. A sharp departure from the trend in distance between banks and borrowers is indicative of increased risk taking. 

,

After seven successful workshops, the organizing committee of this small informal workshop invites submissions of high-quality theoretical and empirical research on financial intermediation. Scholars in the fields of banking and finance will meet to discuss current issues in banking, financial stability, and financial regulation, focusing on policy reforms for a stable global financial environment. The workshop will provide an opportunity for presentations and discussions about policy-relevant research in an informal and highly interactive environment.

Thorsten Beck, Emily Jones , Peter Knaack, 15 October 2018

In today’s world of globalised finance, regulators in developing countries have to weigh up the international ramifications of their decisions. This column presents the results of a research project which combines cross-country panel analysis and in-depth case studies of the political economy of the adoption of Basel II/III in the developing world. It finds that regulators in developing countries do not merely adopt Basel II/III because these standards provide the optimal technical solution to financial stability risks in their jurisdictions; concerns about reputation and competition are also important. 

Pages

CEPR Policy Research