Announcement
Financial stability is emerging as a distinct policy function of central banks, requiring its own scholarship separate from, but related to, monetary policy or bank supervision. One element of financial stability is to understand the benefits of and potential risks posed by new financial instruments used increasingly by both domestic and international market participants.
Theoretical and empirical papers related to the following set of topics and research questions will be presented and discussed at the workshop:
Implications of risk transfer mechanisms for the macroeconomy
If bank loans are funded directly by capital markets (eg through securitisations and collateralised debt obligations), how will this innovation affect underwriting standards, agency problems, the monetary transmission mechanism and business cycles more generally?
What are the linkages between macroeconomic conditions, financial instability and financial risk transfer mechanisms?
The role of non-bank institutions in financial markets
What are the systemic implications of the financial market activities of non-bank institutions, including insurance and reinsurance companies, pension funds and hedge funds?
How do the relationships between banks and non-banks affect financial stability?
Regulation, risk management and future challenges
What are the systemic challenges posed by greater reliance on over-the-counter derivatives markets for credit risk transfer products? Are market infrastructures sufficiently robust to support the growth of these markets?
The markets for credit risk transfer vehicles: How well do they function in normal times and in stress times? Do current levels of concentration in brokerage pose systemic risks? What are future challenges?
How do risk transfer innovations affect the funding liquidity risks of banks?
Are there implications for how to regulate banks going forward (eg capital regulations)? Are there also implications for supervisory practices?
Operational risk transfer mechanisms: What is the current experience? What are the challenges? How are they likely to develop? How effective are they as a substitute for capital?
The workshop aims to bring together leading academics, representatives of the Basel Committee member organisations1, other central bankers, bank supervisors and market participants.
1 The Basel Committee on Banking Supervision was established by the central bank Governors of the Group of Ten countries and its members come from Belgium, Canada, France, Germany, Italy, Japan, Luxembourg, the Netherlands, Spain, Sweden, Switzerland, the United Kingdom and the United States. Countries are represented by their central bank and also by the authority with formal responsibility for the prudential supervision of banking business.
About the workshop
Joint workshop by the Research Task Force of the Basel Committee on Banking Supervision, the Centre for Economic Policy Research (London), and the Journal of Financial Intermediation, at the Bank for International Settlements, Basel, Switzerland, 29-30 May 2008.
- Ben S Bernanke, Chairman, Board of Governors of the Federal Reserve System (via video conference link)
- Hyun Song Shin, Princeton University, is affiliated with the Department of Economics and the Bendheim Center for Finance
- Viral Acharya (London Business School and JFI)
- Markus Brunnermeier (Princeton University and JFI)
- Klaus Duellmann (Deutsche Bundesbank)
- Mike Fishman (Northwestern University and JFI)
- Diana Hancock (Federal Reserve Board)
- Nancy Masschelein (National Bank of Belgium)
- David Nebhut (US Office of the Comptroller of the Currency)
- Erlend Nier (International Monetary Fund)
- George Pennacchi (University of Illinois and JFI)
- Rafael Repullo (Centro de Estudios Monetarios y Financieros and CEPR)
- Bent Vale (Central Bank of Norway)
- Dimitri Vayanos (London School of Economics and JFI)
- Vish Viswanathan (Duke University and JFI)
- Ernst-Ludwig von Thadden (University of Mannheim, CEPR and JFI)
Martin Birn (Basel Committee Secretariat)
Special issue of the Journal of Financial Intermediation
A special issue of the Journal of Financial Intermediation (JFI) was devoted to the workshop.
Day 1 - 29 May
Myron L Kwast, Board of Governors of the Federal Reserve System and Co-Chairman of the Research Task Force
| Chair: Mark Levonian (Office of the Comptroller of the Currency) |
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Tobias Adrian (Federal Reserve Bank of New York) Discussion by Jon Danielsson (London School of Economics) |
Correlation in corporate defaults: Contagion or conditional independence? | presentations David Lando (Copenhagen Business School) Discussion by Darrell Duffie (Graduate School of Business, Stanford University) |
Diana Hancock (Board of Governors of the Federal Reserve System) Discussion by Reint Gropp (Goethe University Frankfurt) |
Hyun Song Shin (Princeton University, Department of Economics and Bendheim Center for Finance)
| Chair: Ernst-Ludwig von Thadden (University of Mannheim, CEPR and JFI) |
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Credit spreads and real activity | presentation Phillip Mueller (Columbia Business School) Discussion by George Pennacchi (University of Illinois and JFI) |
Credit booms and lending standards: Evidence from the subprime mortgage market | presentation Giovanni Dell'Ariccia (International Monetary Fund) Discussion by Vikrant Vig (London Business School) |
Ben S Bernanke; Chairman and Member of the Board of Governors of the Federal Reserve System (via video conference)
Day 2 - 30 May
| Chair: Anjan Thakor (Washington University) |
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Imperfect competition in the inter-bank market for liquidity as a rationale for central banking Viral Acharya (London Business School and CEPR) Discussion by Loriana Pelizzon (University Ca' Foscari di Venezia) |
Nada Mora (Bank of England) Discussion by Martin Summer (Austrian National Bank) |
Collateral, financial intermediation and the distribution of debt capacity Adriano Rampini (Duke University) Discussion by Denis Gromb (London Business School) |
The risks of bank wholesale funding | presentation Rocco Huang (Federal Reserve Bank of Philadelphia) Discussion by Bent Vale (Central Bank of Norway) |
| Chair: Peter Praet (National Bank of Belgium and Basel Committee on Baning Supervision) |
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Has the CDS market lowered the cost of corporate debt? Adam Ashcraft (Federal Reserve Bank of New York) Discussion by Wolfgang Bühler (University of Mannheim) |
Credit risk transfer in banking markets with hard and soft information | presentation Hendrik Hakenes (University of Hannover and MPI Bonn) Discussion by Florian Heider (European Central Bank) |
Solvency Regulation and Credit Risk Transfer Vittoria Cerasi (Bicocca University) Discussion by Janet Mitchell (National Bank of Belgium) |
Ernst-Ludwig von Thadden (University of Mannheim, CEPR and JFI)