School hosts Central Bankers' Forum
The Centre for Banking, Institutions and Development (CBID) at Durham University Business School hosted on 10 February 2016 the CBID Central Bankers' Forum with speakers from the Central Bank of Ireland, the Deutsche Bundesbank and the Bank of England. One big focus of the forum was bank regulation pre- and post-financial crisis.
Peter Dunne, Senior Research Economist at the Central Bank of Ireland, opened the forum by presenting his recent research on “ECB Monetary Policy and the Interbank Repo Market” co-authored with Michael Fleming (Federal Reserve Bank of New York) and Andrey Zholos (Credit Suisse). The research focused on understanding the relationship between Euro interbank borrowing and lending activities and the actions of the ECB in terms of liquidity providing operations and interest rate events. Peter motivated his presentation by asking the following key questions: How did ECB liquidity operations and rate changes transmit to interbank markets? Are liquidity operations substitutes for interbank activity? Did non-standard auctions help in easing interbank market tensions and via what mechanism? Peter’s analysis indicated that the interbank market activity may be the first casualty of official liquidity funding operations through a balance-sheet mechanism. His work stressed upon the fact that transmission of monetary policy is not as simple as usually understood and highlighted the need for more research in this area.
The discussion on monetary policy regulation was aptly followed by presentation from Kartik Anand from Deutsche Bundesbank, who addressed the forum on how financial crises influence legal reforms. His presentation was titled “Financial Crises, Endogenous Creditor Protection and Private Investment”, work co-authored with Prasanna Gai (University of Auckland). Kartik presented a model of asset-backed securities and derived implications for how private investment depends on legal flexibility and secondary markets. The findings of his research contribute to the policy debate on reviving securitization markets in Europe following the recent financial crisis.
Jeremy Chiu from the Bank of England closed the forum by presenting his analysis of an important recent banking-sector phenomenon observed in the United Kingdom. His talk was titled “The Rate Elasticity of Retail Deposits in the United Kingdom”, research co-authored with John Hill (Bank of England). He noted that after the global financial crisis, UK banks have become more reliant on customer deposits, a large proportion of which are from households. The introduction of new liquidity standards under Basel III – the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) – also incentivised banks to increase their share of retail funding at the expense of wholesale funding. So given that UK banks' reliance on retail funding has increased, Jeremy’s research aims at understanding how resilient banks will be when they face retail funding shortfalls. His analysis based on five (unnamed) major UK banks estimated the increase in deposit rates required by UK banks to cover a deposit gap caused by funding shocks and provided evidence that banks are more vulnerable to deposit supply shocks than deposit demand shocks.
The CBID Central Bankers' Forum highlighted the need for more research in understanding the regulatory aspects of banking and their causal effects on financial markets.
If you would like to participate in such future events hosted by the Centre for Banking, Institutions and Development, please contact Dr Dennis Philip.