Friday, Jan. 4, 2019 8:00 AM - 10:00 AM
- Chair: Jean Tirole, Toulouse School of Economics, IAST & UT1C
Shadow Banking and the Four Pillars of Traditional Financial Intermediation
AbstractTraditional banking is built on four pillars: SME lending, deposit taking, access to lender of last resort and deposit insurance, and prudential supervision. This paper unveils the logic of the quadrilogy by putting core services to "special depositors and borrowers" at the heart of the analysis, and makes room for bank and depositor implicit and explicit guarantees. It analyzes how prudential regulation must adjust to the emergence of shadow banking. The model also rationalizes structural remedies to counter syphoning and financial contagion: ring-fencing between regulated and shadow banking and the sharing of liquidity in centralized platforms.
Liquidity Regulation, Bail-ins and Bailouts
AbstractWhen liquidity requirements for banks were introduced in the wake of the 2008 financial crisis, policymakers received little academic guidance on specific questions such as the measure of the liquidity buffer, its possible decomposition into multiple tiers, and the treatment of interbank exposures, of the securitization of legacy assets, and of systemic stress. Similarly, the introduction of layers of ``bail-inable'' liabilities occurred without conceptual framework on the consistency between liquidity and solvency regulations. The paper develops such a framework, integrates the asset and liability sides into an overall design of prudential regulation and assesses the regulatory reforms.
- E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit
- G2 - Financial Institutions and Services