Seminar
Systemic banks and the lender of last resort
Marc Rennert (Bundesbank)
Fédération des Banques Françaises Seminar
TSE, March 26, 2012, 12:30–14:00, room MF 323
Reference
Marc Rennert (Bundesbank), “Systemic banks and the lender of last resort”, Fédération des Banques Françaises Seminar, TSE, March 26, 2012, 12:30–14:00, room MF 323.
Abstract
This paper proposes a model where systemic banks coexist with non-systemic banks. Troubles in a systemic bank may hurt non-systemic banks but not vice versa. We analyze the decision of the central banker and the deposit insurer to provide emergency liquidity assistance to illiquid banks whose solvency conditions are only observed through supervision. We find that the existence of systemic banks provides a rationale for the central bank to act as lender of last resort in a larger range of banks' liquidity shortfalls than when all banks are non-systemic. We discuss policy implications that inform current reform efforts to the architecture of banking regulation and supervision.
Research partnership
Fédération des Banques Françaises Research Initiative (sustainable)