madrid june 2012 a macroeconomic model of endogenous systemic risk-taking by martínez-miera and...
TRANSCRIPT
Madrid June 2012
A Macroeconomic Model of Endogenous Systemic Risk-taking
by Martínez-Miera and Suarez
Discussion byFrederic Malherbe
London Business School
• Main research questions٧ Optimal level of capital requirements
• Approach٧ New framework٧ Sophisticated / elegant٧ Deposit insurance => risk-shifting is attractive
• Results٧ Trade-off between credit rationing and systemic risk٧ Optimal capital requirements are 14%
Overview
Banks
The economy
Bankers Depositors
Firms
A much simpler version
Bankers
Depositors
The good firms
k
1 + r
e
1 + rL
The risk-shifting firms
k
1 + r
e
1 + rL
The trade offs
Good bank Risk-shifting bank
• For bankers٧ Static: inefficiency Vs subsidy٧ Dynamic: short-term gains Vs last banker standing
• For regulator٧ Inefficiency Vs credit rationing
Equilibrium dynamics
Risk-shifting bankGood bank
Risk-shifting bankGood bank
• Excellent paper!• Whish list
٧ Clarify pooling equilibrium٧ “Dynamic inefficiency” (Malherbe 2012)٧ Cyclically adjusted capital requirements
− Really capture micropru concerns (Repello – Suarez 2012)− Impact of general equilibrium effect may be sensitive to
parameterization
• Next steps ٧ Endogenize and
Main comments
Frédéric Malherbe (LBS)
Thank you very much!