Topic: Post-Crisis Bank Regulations and Financial Market Liquidity

Speaker: Darrell Duffie, Dean Witter Distinguished Professor of Finance, Graduate School of Business, Stanford University

Date: June 13 (Wednesday)

Time: 10:00-11:30am

Location: Building 1, Room 200

Language: English

Abstract:

This is the manuscript of the Baffi Lecture that I delivered at Banca d’Italia in September 2017.

I address the implications for financial-market liquidity of post-crisis capital and failureresolution rules for systemically important banks. I focus especially on over-the-counter (OTC) markets, which handle most of the world’s trade in bonds, repos, swaps, commodities, and foreign exchange. The bulk of trade in these OTC markets is intermediated by roughly 15 large dealers that are regulated as banks or broker-dealer subsidiaries of bank holding companies.

For the purpose of this lecture, I therefore make little distinction between “banks” and “dealers.” Many small dealers are not affiliated with banks and come under different capital and failure-resolution regulations than those considered here. I simply neglect those smaller firms here, although they are important for other concerns. I also focus on the efficiency of traded financial markets, and not on conventional bank lending markets.

About the speaker:

Darrell Duffie is the Dean Witter Distinguished Professor of Finance at Stanford University's Graduate School of Business, and Professor (by courtesy) in the Department of Economics, Stanford University.

Duffie is a Fellow of the Econometric Society, a Research Fellow of the National Bureau of Economic Research, a Fellow of the American Academy of Arts and Sciences, and a member of the board of directors of Moody’s Corporation. He was the 2009 president of the American Finance Association. From 2013-2017, he chaired the Financial Stability Board’s Market Participants Group on Reference Rate Reform.

Duffie’s recent work focuses on capital markets and financial stability. His research is published in Econometrica, Journal of Political Economy, and Journal of Finance, among other journals.  His most recent books are How Big Banks Fail (Princeton University Press, 2010), Measuring Corporate Default Risk (Oxford University Press, 2011), and Dark Markets (Princeton University Press, 2012).