Banking and financial stability ( BANK)

(mars 2022)

Course Outline

•  Introduction.  Basic concepts in banking and finance.  Direct finance vs indirect finance.
Specificity of banking and financial regulation.
•  Fractional  Reserve  Banking  System.   Bank  runs  and  bank  panics.   Fundamental  vs.
beliefs-based bank runs.  Regulatory and institutional responses to financial instability.
•  Narrow banking.
•  Liquidity provision and the lender-of-last-resort function of the central bank.
•  Financial crises.  Business-cycle view of bank runs.  Efficient bank runs.
•  Bail-outs vs.  bail-ins and financial fragility.
•  Aggregate uncertainty and assets’ firesales.
•  Optimal capital and liquidity regulation.
•  The Diamond-Dyvbig model.  Extensions with capital requirements, deposit insurance, bail-outs.
•  Central-bank digital currencies.  Impact on banking and financial stability.