Do Non-Banks Need Access to the Lender of Last Resort? Evidence from Mutual Fund Runs

Breckenfelder, Johannes; Grimm, Niklas; Hoerova, Marie

doi:10.2139/ssrn.3843356

Cited by 3 publications

(3 citation statements)

References 43 publications

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“…The study concludes: 'Our results suggest that central bank interventions were effective in stopping fire-sale dynamics and staving off runs on non-bank financial intermediaries, even though funds did not have direct access to the lender of last resort' (Breckenfelder et al 2020) MMFs provide a deposit-like instrument to investors, especially when they are redeemable on short notice and at par. MMFs extend credit and are also an important provider of short-term funding for the regular banking system as well as for other nonbank chains of credit intermediation that involve maturity transformation and leverage.…”

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confidence: 85%

The Great Game Will Never End: Why the Global Financial Crisis Is Bound to Be Repeated

Blake

2022

JRFM

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This article re-examines key explanations of the Global Financial Crisis—product complexity, behavioural biases in decision making, systemic risk, and regulatory arbitrage and capture—and finds a common underlying cause, namely gaming by personnel at all levels in the banking sector and its regulators. This has enabled banks to use highly leveraged, maturity-mismatched investment strategies, which were designed so that the banks retained the upside rewards, but transferred the downside risks to taxpayers, leading to the privatization of profits and the socialization of losses—behaviour that has been described as ‘banksterism’. Although governments have introduced some significant mitigatory measures, they will not be effective in preventing future financial crises, because they do not and, indeed, cannot provide the appropriate incentives to end the Great Game between bankers and taxpayers, which would involve making bankers, rather than taxpayers, personally liable for losses.

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confidence: 85%

The Great Game Will Never End: Why the Global Financial Crisis Is Bound to Be Repeated

Blake

2022

JRFM

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“…Funds with higher shares of assets eligible for central bank purchases in their portfolio before the COVID-19 crisis saw their performance improve by 3.7% and outflows decrease by 66% relative to otherwise similar funds. In addition, following the announcement and the implementation of additional asset purchases, banks increased the maturity of their lending to funds in the repo market (see Breckenfelder et al, 2020).…”

Section: Chart 27mentioning

confidence: 99%

Nonbank Financial Intermediation in Times of Crisis: Identifying Leadership in the G20 Countries

Evlakhova¹,

Amosova²

2022

JAER

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Non-banking financial intermediation, which means the conduct of credit operations by financial institutions that do not have a license for this and was previously interpreted as “shadow banking”, has become a long-term trend in the development of the global financial market. The purpose of the study is to determine the changes in non-banking financial intermediation during periods of crises and the inter-crisis period, as well as to identify the leading countries in the development of non-banking financial intermediation in a long-term retrospective. A hypothesis is formulated that during periods of crises, not only does the volume of non-banking financial intermediation decrease (on a global scale and within national markets), but its structure also changes. To test the hypothesis, a cross-country comparative analysis of the level of development of non-banking financial intermediation based on the corresponding index was carried out, as well as clustering using the FOREL method to identify changes in the structure of global non-banking financial intermediation. As data sources, data from the Financial Stability Board Monitoring Dataset on Non-Bank Financial Intermediation and OECD. Stat data were used. The results of the study confirmed the correctness of the formulated hypothesis. On their basis, the directions for the development of non-banking financial intermediaries in the current conditions of the approaching recession of the world economy are determined: (1) maintaining the index of non-banking financial intermediation in the current range of values; (2) preservation of the polycluster structure of non-banking financial intermediation, since the decrease in the number of clusters occurs during periods of relative stability of the world economy; (3) increased heterogeneity of countries in terms of the level of non-banking financial intermediation. It is shown that the crisis caused by the pandemic had a stronger negative impact on non-banking financial intermediation than the global financial crisis. The theoretical significance of the results obtained is to identify the structure of global non-banking financial intermediation, as well as to propose a criterion for countries' leadership in terms of its level. The practical significance lies in the possibility of using the results obtained in the development of measures to ensure the stability of financial markets both at the global and national levels.

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“…Investment funds, also abbreviated as "funds" when ambiguity can be ruled out, are the largest component of the non-bank financial intermediation sector, formerly known as "shadow banking system". 2 Market tensions ceased and outflows reversed only when central banks intervened in financial markets, for example, by means of the ECB's Pandemic Emergency Purchase Programme (PEPP) (see Breckenfelder et al, 2021). For an overview of the US case and the interventions of the Federal Reserve, see Falato et al (2021a).…”

Section: Introductionmentioning

confidence: 99%

Macroprudential Regulation of Investment Funds

2022

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Do Non-Banks Need Access to the Lender of Last Resort? Evidence from Mutual Fund Runs

Cited by 3 publications

References 43 publications

The Great Game Will Never End: Why the Global Financial Crisis Is Bound to Be Repeated

The Great Game Will Never End: Why the Global Financial Crisis Is Bound to Be Repeated

Nonbank Financial Intermediation in Times of Crisis: Identifying Leadership in the G20 Countries

Macroprudential Regulation of Investment Funds

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