Finance / CRC TR 224 Seminar SoSe 2018
Tuesday, 12:15-13:30 in the Faculty Lounge, Juridicum, Adenauerallee 24-42, 53113 Bonn
April 10, 2018
Wolf Wagner, Rotterdam School of Management/CRC TR 224
“The Economics of Supranational Bank Supervision" (with Thorsten Beck and Consuelo Silva-Buston)
Abstract: We document large variation in the propensity and the intensity in which countries cooperate in the supervision of banks. We show that these variations can be linked to differences in cooperation gains. Using hand-collected data on supranational agreements for 4,278 country pairs during the period 1995-2013, we find that proxies for bilateral cooperation gains a) increase the likelihood of cooperation, b) accelerate the adoption of cooperation, c) make intense forms of cooperation more likely. An analysis of regional cooperation shows that their make-up, as well as their evolution, is broadly consistent with predicted cooperation gains. Our findings suggests that a uniform approach to supranational supervision is not necessarily desirable as countries differ considerably in the extent to which they benefit from cooperation.
April 17, 2018
Eva Schliephake-Fiedalgo, Univ. Bonn
"Slow Bank-Runs and Early Intervention"
Abstract: In the recent Eurozone crisis, slow-motion runs have occurred that started with the slow capital outflow and eventually culminated in bank runs. We analyze the dynamics of such a run. Few sophisticated investors can gather information on the bank’s actual asset value and quickly withdraw their investments in case the bank’s asset value is low. Less informed investors can defer their withdrawal decision to observe the behavior of informed investors and mimic their withdrawal behavior. Waiting avoids inefficient liquidation but leaves late investors with less security. The more investors become informed, the more likely are preemptive panic runs. In these situations of distress, a regulator may prefer early capital injections to later bailouts in order to prevent information acquisition by investors. This may explain repeated capital injections in the European sovereign debt crisis.
April 24, 2018
Tanju Yorulmazer, Univ. of Amsterdam/CRC TR 224
"A Theory of Collateral for the Lender of Last Resort"
Abstract: We take a macroprudential approach to analyze the optimal lending policy for the central bank, focusing on externalities that policy imposes on private markets. Lending against high-quality collateral protects central banks against losses but can adversely afect liquidity creation in markets since high-quality collateral gets locked up in the central bank rather than circulating in markets. Lending against low-quality collateral creates counterparty risk but can improve liquidity in markets. We characterize the optimal central bank policy incorporating these trade-offs. We show that, contrary to what is generally accepted, lending against highquality collateral can have negative effects, whereas it may be optimal to lend against lowquality collateral.
May 29, 2018
Jean Edouard Colliard, HEC Paris/CRC TR 224
''Measuring Regulatory Complexity''
Abstract: Despite a heated debate on the perceived increasing complexity of financial regulation, there is no available measure of regulatory complexity other than the mere length of regulatory documents. To fill this gap, we propose to apply simple measures from the computer science literature by treating regulation like an algorithm – a fixed set of rules that determines how an input (e.g., a bank balance sheet) leads to an output (a regulatory decision). We apply our measures both to the stylized regulation of a bank in a theoretical model and to an actual regulatory text (the Dodd-Frank Act). Our results emphasize that shorter regulations are not necessarily less complex, as they can also use more “high-level” language and concepts. Finally, we propose a protocol to validate our measures experimentally.
June 26, 2018
Thorsten Beck, Cass Business School London/CRC TR 224
“Sharing the Pain? Credit Supply and Real Effects of Bank Bail-ins”
Abstract: We analyze the credit supply and real sector effects of bank bail-ins by exploiting the unexpected failure of a major Portuguese bank and subsequent resolution. Using a matched firm-bank dataset on credit exposures and interest rates, we show that while banks more exposed to the bail-in significantly reduced credit supply at the intensive margin, affected firms compensated the tightening of overall credit with other sources of funding. Nevertheless, SMEs were subject to a binding contraction of funds available through credit lines and reduced investment and employment. These dampening effects are explained by the pre-shock internal liquidity position of smaller firms.
July 10, 2018
Mariassunta Giannetti, Stockholm School of Economics/CRC TR 224
"Uncertainty, Access to External Finance, and Firm Precautionary Behavior"
Abstract: Uncertainty affects corporate policies by delaying investment decisions and by fostering firms’ precautionary saving. We document that improving firms’ access to external finance mitigates the effects of uncertainty on corporate policies. We use the staggered introduction of anti-recharacterization laws in U.S. states—which strengthened creditors’ rights to repossess pledged collateral—to identify firms’ improved access to external finance. After the passage of these laws, firms that face more uncertainty hoard less cash and increase payouts, leverage, employment, and investment in intangible assets; these firms also experience better performance than control firms.