How well equipped are today's macroprudential regimes to deal with a re-run of the factors that led to the global financial crisis? We argue that a large proportion of the fall in US GDP associated with the crisis can be explained by two factors: the fragility of financial sector — represented...

We propose a structural framework for the development of system-wide financial stress tests with multiple interacting contagion, amplification channels and heterogeneous financial institutions. This framework conceptualises financial systems through the lens of five building blocks: financial...

Macroprudential authorities increasingly find themselves needing to assess, and act on, risks from outside the traditional banking system. How should they think about the costs and benefits of these actions? In this paper we present an approach to cost-benefit analysis for one topical issue...

More widespread central clearing could enhance dealers’ ability to intermediate financial markets by increasing the netting of buy and sell trades, thereby reducing the impact of trading on balance sheets and capital ratios. Drawing on trade‑level regulatory data, we study the netting...

Large-value payment systems (LVPS) often have a tiered structure where only a limited number of banks have direct access to these systems and every other institution accesses the system through agency arrangements with the direct participants. As such, a high degree of tiering is often perceived...

Distributed ledger technology (DLT) is a database architecture which enables the keeping and sharing of records in a distributed and decentralized way, while ensuring its integrity through the use of consensus-based validation protocols and cryptographic signatures. In principle, DLT has the...

We develop a model of dealer intermediation in bond markets that takes account of how changing regulatory requirements for banks since the financial crisis, in particular, the introduction of minimum leverage ratio requirements, affect the cost and ability of dealer banks to provide...

This paper provides a means of estimating how ‘Solvency II' regulations — introduced in the European Union in January 2016 — might affect UK life insurers' incentives to hold different types of financial assets, and how these asset holdings are likely to vary in the face of hypothetical...

This paper shows that the leverage ratio affects repo intermediation for banks and non-bank financial institutions. We exploit a novel regulatory change in the UK to identify an exogenous intensification of the leverage ratio and combine this with supervisory transaction-level data capturing the...

Credit spreads on household and business loans move in lockstep and spike in every recession. We propose a theory as to why banks tighten their lending standards following a drop in market sentiment. The key feature is a procyclical shadow banking sector that shifts risk from traditional banks...