Tax Reform’s Impact on Bank and Corporate Cyclicality
The Tax Cuts and Jobs Act (TCJA) is expected to increase after-tax profits for most companies, primarily by lowering the top corporate statutory tax rate from 35 percent to 21 [...]
Policy uncertainty, financial stability, and stress testing
Since the 2009 Supervisory Capital Assessment Program (SCAP), US regulators have employed a representative bank model as the benchmark of comparison in mandatory stress test exercises. For risk management functions, [...]
Macroprudential and Monetary Policies: The Need to Dance the Tango in Harmony
The Great Recession during the late 2000s and early 2010s has led to a strengthening of macroprudential policies over the world in order to address systemic risk concerns. However, the [...]
Externalities and Financial Crisis – Enough to Cause Collapse?
After the boom in US subprime lending came the bust - with a run on US shadow banks. The magnitude of boom and bust were, it seems, amplified by two [...]
Financial Stability, Interest Rate Smoothing and Equilibrium Determinacy
This paper examines the interaction between monetary policy and financial stability and provides an assessment of the implications of banks’ risk management practices for monetary policy. By considering the desire [...]
The Misguided Beliefs of Financial Advisors
A common view of retail finance is that conflicts of interest contribute to the high cost of advice. Within a large sample of Canadian financial advisors and their clients, however, [...]
Macroprudential margins: a new countercyclical tool?
We quantify the size of a fire-sale externality in the derivatives market in the absence of a macroprudential buffer on top of microprudential initial margin requirements. We show how this [...]
Banks Without Parachutes: Competitive Effects of Government Bail-Out Policies
We analyze the competitive effects of government bail-out policies in two models with different degrees of transparency in the banking sector. Our main result is that bail-outs lead to higher [...]
The Costs and Benefits of Bank Capital – A Review of the Literature
In 2010, the Basel Committee on Banking Supervision published an assessment of the long-term economic impact (LEI) of stronger capital and liquidity requirements (BCBS (2010)). This paper considers this assessment [...]
Key Attributes of Effective Resolution Regimes for Financial Institutions
When the FSB adopted the Key Attributes in 2011 it was agreed to develop further guidance on their implementation, taking into account the need for implementation to accommodate different national [...]