Avdeling for samfunnsøkonomi og finans. Seminaret foregår på engelsk
Forfatter/presentatør: Yabin Wang
Universitet: NTNU
Tittel: Wholesale funding runs
Zoomlenke: https://stavanger.zoom.us/j/67698017026?pwd=MXFwVXd4QlNJYXZpdmdGTnZwV3loQT09
ID: 676 9801 7026
Passord: 249750
Abstrakt:
We use data on the Chinese market for negotiable certificates of deposit to examine the effect of the 2019 default of Baoshang Bank, which is interpreted as a break in the longstanding implicit guarantee of the Chinese government on wholesale funding debt. The Baoshang default resulted in a sudden increase in failed CD issues, despite banks offering higher yields. Moreover, CD yield spreads and failure probabilities became more sensitive to bank characteristics after the default event. We show that these facts are consistent with a model of dynamic debt runs. The model quantitatively matches the probability of runs, the distribution of CD spreads and the probability of recovery from a run. Our calibrated model suggests that policy interventions are warranted to reduce the incidence of runs on illiquid but solvent banks.
