Topic: US Banks and Global Liquidity
Speaker:Wenxin Du, Associate Professor of Finance and Biehler Junior Faculty Fellow, University of Chicago, Booth School of Business
Date: June 10, 2020 (Wednesday)
Time: 10:00am-11:30am
Location: Zoom
Language: English
Abstract:
We characterize how large U.S. banks supply dollar liquidity in the post-crisis regulatory environment and serve as the “lenders-of-second-to-last-resort”. Using regulatory filings for the Basel III Liquidity Coverage Ratio assessment, we focus on the most quantitatively important and scalable components of short-term liquidity provision through collateralized lending in repo and foreign exchange swap markets. We find that U.S. banks modestly increase their dollar liquidity provision when funding spreads rise, particularly when the U.S. Treasury General Account balance increases, draining cash from the banking system, and at period-ends, when foreign banks contract dollar funding intermediation. Furthermore, the increase in the dollar liquidity provided by large U.S. banks in response to dollar funding shortage is mainly financed by reducing excess reserve balances at the Federal Reserve. Finally, we discuss factors that may have led to banks’ reduced willingness to supply liquidity in September 2019, when there was a squeeze in short-term funding markets.
About the speaker:
Wenxin Du is an associate professor of finance at the University of Chicago Booth School of Business. She studies global currency and fixed income markets, financial regulations, and emerging market finance. She has won several top academic research awards, including the Amundi Pioneer First Prize and AQR Insight Award Top Prize for her work on deviations from covered interest rate parity. Her research has been featured in Bloomberg, Financial Times, The Economist, and The Wall Street Journal. She has published articles in leading academic journals, such as the American Economic Review: Insights, Journal of Finance and the Journal of International Economics. She has spoken at many high-profile international economic conferences, including the Federal Reserve Jackson Hole Economic Policy Symposium.
Prior to joining Booth, Du held the position of Principal Economist at the Board of Governors of the Federal Reserve System, where she was responsible for monitoring and analyzing developments in international financial markets for the FOMC. She was also a central bank research fellow at the Bank for International Settlements in Basel, Switzerland. During her doctoral studies, she interned at the International Monetary Fund.
She earned an A.M. and a Ph.D. both in Economics from Harvard University and a B.A. in Economics and Mathematics from Swarthmore College with Highest Honors.
