This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.

  1. Home
  2. ASSA Annual Meeting
  3. 2023
  4. Program
  5. Financial Intermediation: Regulation
« Back to Results

Financial Intermediation: Regulation

Paper Session

Sunday, Jan. 8, 2023 1:00 PM - 3:00 PM (CST)

Sheraton New Orleans, Napoleon A
Hosted By: American Finance Association
  • Chair: Cecilia Parlatore, New York University

Open Banking with Depositor Monitoring

Itay Goldstein
,
University of Pennsylvania
Chong Huang
,
University of California-Irvine
Liyan Yang
,
University of Toronto

Abstract

Open banking is a policy innovation that allows borrowers to share their data with any financial institution in lending markets. This paper studies how open banking reshapes lending market competition and whether it will increase borrower welfare or optimize resource allocations. We develop a model of banking competition with bank depositors responding to bank investments endogenously. Depositors' monitoring exacerbates winner's curse, which can result in informational monopoly under current banking and make banks hesitate to fund borrowers under open banking. Relative to the current banking system, open banking can lead to higher borrower welfare but inefficient resource allocations, lowering ex-ante economic efficiency.

Green Capital Requirements

Martin Oehmke
,
London School of Economics
Marcus Opp
,
Stockholm School of Economics

Abstract

We study bank capital requirements as a tool to address financial risks and externalities caused by carbon emissions. Capital regulation can effectively address climate-related financial risks but doing so does not necessarily reduce emissions. For example, higher capital requirements for carbon-intensive loans exposed to transition risk may crowd out lending to clean firms. When it comes to affecting carbon externalities, capital requirements are inferior to carbon taxes: Reducing carbon emissions via capital requirements may require sacrificing financial stability or may be altogether infeasible. However, if the government is unable to commit to future environmental policies, capital requirements can make higher carbon taxes credible by ensuring banks have sufficient capital to absorb losses from stranded asset risk.

Opitmal Forbearance of Bank Resolution

Linda Schilling
,
Ecole Polytechnique

Abstract

This paper analyzes a regulator's optimal strategic delay of resolving banks when the regulator's announcement of the intervention delay endogenously affects the depositors' run-propensity.
Given intervention, the regulator either liquidates the remaining illiquid assets, or continues managing the assets (suspension intervention) at a reduced skill level.
In either case, I show, the depositors may react to more conservative policy by preempting the regulator: The depositors run on the bank more often ex ante if the regulator tolerates fewer withdrawals until intervention. A policy of never intervening can leave the bank more stable than a conservative policy that tolerates few withdrawals.

Discussant(s)
Jian Li
,
Columbia University
Eduardo Dávila
,
Yale University
Toni Ahnert
,
Bank of Canada, European Central Bank, and CEPR
JEL Classifications
  • G2 - Financial Institutions and Services