Policy Briefs
I provide a collection of shorter articles and policy reports related to the recent banking stress and the underlying economic issues along three dimensions:
Implications of monetary policy: Has monetary policy and the long period of high liquidity and low interest rates contributed to the stress in the banking sector? Have banks become “addicted” to central bank liquidity?
Banking sector credit risk: How important are bank investments (e.g., in sovereign bonds or in real estate) and funding structure (e.g., short-term uninsured deposits or depositor concentration) for the current problems in the banking sector?
Stress testing: How can we assess bank asset and funding risk and what are implications for capital requirements?
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Acharya, V., R. Chauhan, R. Rajan, and S. Steffen (2023). Demandable claims on bank liquidity complicate the unwinding of central bank balance sheets. VoxEU Column.
Acharya, V., R. Chauhan, R. Rajan, and S. Steffen (2023). Liquidity Dependence and the Waxing and Waning of Central Bank Balance Sheets. CEPR Discussion Paper
Acharya, V., R. Chauhan, R. Rajan, and S. Steffen (2022). Liquidity Dependence: Why Shrinking Central Bank Balance Sheets Is An Uphill Task” , Proceedings of the Jackson Hole Economic Symposium of the Federal Reserve Bank of Kansas City on “Reassessing Constraints on the Economy and Policy”, 2022.
- Covered in Bloomberg and Fortune (August 27, 2022)
- Covered in FAZ (September 9, 2022) in German
- Op-ed "Where has all the liquidity gone?" in Project Syndicate, Acharya/Rajan (Oct 7, 2022)
- Macroeconomic Review, Monetary Authority of Singapore, Special Feature -
Georg, C., D. Pierret and S. Steffen (2023). Silicon Valley Bank’s insolvency highlights the risk of similar investors. VoxEU column
Lautenbacher, S., J. Miethe, A. Peichl, S. Rumscheidt, and S. Steffen (2021). Eigenkapital staerken?! Im Rahmen des Vertrags zur Erstellung volkswirtschaftlicher Studien, IHK für München und Oberbayern, ifo Zentrum für Makroökonomik und Befragungen.
Acharya, V., and S. Steffen (2020). The risk of being a fallen angel and the corporate dash for cash in the midst of COVID, Covid Economics (10), 44-61.
Schneider, Y. and S. Steffen (2017). Feasibility Check: Transition to a New Regime for Bank Sovereign Exposure? In-Depth Analysis, provided at the request of the Economic and Monetary Affairs Committee, European Parliament.
Acharya, V., and S. Steffen (2015). The banking crisis as a giant carry trade gone wrong. VoxEU column.
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While it is too early to know specifics, the recent episodes will likely have implications for the design and application of stress tests of banks going forward. Here, I highlight some of the work we have done on stress tests after the global financial crisis.
Acharya, V., and S. Steffen (2020). “Stress Test” for Banks as Liquidity Insurers in a time of COVID. VoxEU.
Acharya, V., D. Pierret, and S. Steffen (2016). Introducing the “Leverage Ratio” in Assessing the Capital Adequacy of European Banks.
Steffen, S. (2015). Capital Shortfalls in SSM Banks: How much progress has been made? In-Depth Analysis, provided at the request of the Economic and Monetary Affairs Committee, European Parliament.
Steffen (2014). Robustness, validity and significance of the ECB’s asset quality review and stress test exercise. In-Depth Analysis, provided at the request of the Economic and Monetary Affairs Committee, European Parliament.
Acharya, V. and S. Steffen (2014). Benchmarking the European Central Bank's Asset Quality Review and Stress Test – A Tale of Two Leverage Ratios. Center of European Policy Studies Working Paper Series.