Becker Friedman Institute for Economics Working Paper – Book Value Risk Management of Banks: Limited Hedging, HTM Accounting, and Rising Interest Rates

Author(s):Joao Granja, Erica Xuewei Jiang, Gregor Matvos, Tomasz Piskorski, Amit Seru Date:April 2024 Abstract: In the face of rising interest rates in 2022, banks mitigated interest rate exposure of the accounting value of their assets but left the vast majority of their long-duration assets exposed to interest rate risk. Data from call reports and SEC[…]

Foreign-borne Interest Rate Risk: Effects of Foreign Deposits on Monetary Policy and Bank Balance Sheets

Author(s):Rashad Ahmed Date:March 2024 Abstract: Foreign deposits are a key funding source for US commercial banks but subject to a different degree of interest rate risk than domestic deposits. Specifically, foreign deposit betas are significantly larger than domestic deposit betas, implying that the former has shorter effective duration. Larger foreign deposit betas imply that the[…]

NBER Working Paper – The Secular Decline of Bank Balance Sheet Lending

Author(s):Greg Buchak, Gregor Matvos, Tomasz Piskorski & Amit Seru Date:February 2024 Abstract: The traditional model of bank-led financial intermediation, where banks issue demandable deposits to savers and make informationally sensitive loans to borrowers, has seen a dramatic decline since 1970s. Instead, private credit is increasingly intermediated through arms-length transactions, such as securitization. This paper documents[…]

New York FED Staff Reports – International Banking and Nonbank Financial Intermediation: Global Liquidity, Regulation, and Implications

Author(s):Claudia M. Buch, Linda S. Goldberg Date:March 2024 Abstract: Global liquidity flows are largely channeled through banks and nonbank financial institutions. The common drivers of global liquidity flows include monetary policy in advanced economies and risk conditions. At the same time, the sensitivities of liquidity flows to changes in these drivers differ across institutions and[…]

NBER Working Paper – The Geography of Capital Allocation in the Euro Area

Author(s):Roland Beck, Antonio Coppola, Angus J. Lewis, Matteo Maggiori, Martin Schmitz & Jesse Schreger Date:March 2024 Abstract: We assess the pattern of Euro Area financial integration adjusting for the role of “onshore offshore financial centers” (OOFCs) within the Euro Area. The OOFCs of Luxembourg, Ireland, and the Netherlands serve dual roles as both hubs of[…]

NBER Working Paper – Deposit Insurance, Uninsured Depositors, and Liquidity Risk During Panics

Author(s):Matthew S. Jaremski, Steven Sprick Schuster Date:March 2024 Abstract: The lack of universal deposit insurance coverage can create liquidity risk during financial crises. This aspect of deposit insurance is hard to test in modern data because of the broad coverage of most systems. We, therefore, study the role that the U.S. Postal Savings System played[…]

CEPR Discussion Paper – Where Do Banks End and NBFIs Begin?

Author(s):Viral Acharya, Nicola Cetorelli, Bruce Tuckman Date:March 2024 Abstract: In recent years, assets of non-bank financial intermediaries (NBFIs) have grown significantly relative to those of banks. These two sectors are commonly viewed either as operating in parallel, performing different activities, or as substitutes, performing substantially similar activities, with banks inside and NBFIs outside the perimeter[…]

CEPR Discussion Paper – Macroeconomic and Financial Effects of Natural Disasters

Author(s):Sandra Eickmeier, Josefine Quast, Yves Schüler Date:March 2024 Abstract: We examine how natural disasters impact the US economy and financial markets using monthly data since 2000. Our analysis reveals large sustained adverse effects of disasters on overall economic activity, with significant implications across various sectors including labor, production, consumption, investment, and housing. Our findings suggest[…]

CEPR Discussion Paper – Risky firms and fragile banks: implications for macroprudential policy

Author(s):Tommaso Gasparini, Vivien Lewis, Stéphane Moyen, Stefania Villa Date:March 2024 Abstract: Increases in firm default risk raise the default probability of banks while decreasing output and inflation in US data. To rationalize the empirical evidence, we analyse firm risk shocks in a New Keynesian model where entrepreneurs and banks engage in a loan contract and[…]

NBER Working Paper – Banks in Space

Author(s):Ezra Oberfield, Esteban Rossi-Hansberg, Nicholas Trachter & Derek T. Wenning Date:March 2024 Abstract: We study the spatial expansion of banks in response to banking deregulation in the 1980s and 90s. During this period, large banks expanded rapidly, mostly by adding new branches in new locations, while many small banks exited. We document that large banks[…]