Interest Rate Risk & Cross-Section Effects of Micro-Prudential Regulation|The Next Financial Crisis?

The video presents a rigorous academic paper that addresses a timely and important topic: the differential exposure of banks to interest rate risk and run risk, and the implications for micro-prudential regulation. The presentation is well-structured, starting with motivating empirical facts, then laying out a theoretical model, and finally discussing policy implications. The model is sophisticated, incorporating key features such as product differentiation in deposit markets, endogenous runs, and heterogeneity in bank productivity. The calibration to US data adds credibility, and the model appears to replicate important cross-sectional patterns. The discussants provide valuable comments, highlighting potential limitations and extensions. However, the video is a presentation, not a full paper, so some details of the model and its assumptions are not fully explained. The discussion is technical and may be challenging for a general audience. The video does not include a full literature review or a detailed comparison with alternative models. The policy conclusions, while interesting, are based on a specific model and may not be directly generalizable. Overall, the content is of high quality and contributes to the understanding of bank risk and regulation, but it is not a comprehensive review of the literature and should be viewed as a presentation of ongoing research.

The title accurately reflects the content: the session focuses on interest rate risk and cross-sectional effects of micro-prudential regulation, within the broader conference theme of the next financial crisis.

8/10

Presentation by a recognized academic (Juliane Begenau) at a high-level conference (ECB Annual Research Conference), with formal model and calibration to US data. Discussants are prominent academics. However, the video is a recording of a presentation, not a peer-reviewed publication, and the model's assumptions and simplifications are not fully scrutinized in the video.

Markers derived by PSI from the transcript: the creator did not define chapters.

• 00:00Introduction by the chair, Ross Levine, and presentation start by Juliane Begenau.
• 01:00Motivation: banks' assets resemble fixed income securities, and recent rate hikes revealed differential exposure to interest rate and run risk.
• 03:00Overview of the paper: theoretical model with two periods, heterogeneity in lending and deposit productivity, product differentiation, and endogenous runs.
• 05:00Data motivation: security share decreases with bank size, uninsured deposit share increases with bank size.
• 08:00Model setup: household preferences, bank portfolio and funding choices, government insurance of insured deposits.
• 10:00Bank's problem: portfolio choice between loans and bonds, funding choice between insured and uninsured deposits, run risk and default.
• 15:00Calibration: key parameters, product differentiation in deposit markets, calibrated to US data.
• 20:00Model results: cross-sectional patterns in asset size, bond share, and uninsured deposit share match data.
• 25:00Interest rate shock: solvency defaults in small banks, run defaults in large banks.
• 30:00Policy analysis: size-dependent capital requirements are most effective at reducing run risk.
• 35:00Discussion by Augustin Landier: comments on model assumptions and potential extensions.
• 40:00Discussion by Markus Brunnermeier: comments on the model's implications and policy relevance.
• 45:00Q&A session with the audience.

• 10th ECB Annual Research Conference programme — Official conference programme providing details on the session and participants.
• YouTube playlist of the conference sessions — Playlist containing other sessions from the conference.

• ECB Annual Research Conference programme — The conference programme confirms the session's theme and participants, aligning with the video content.