On 28th June the Department of Economics and Finance held the Second Brunel Banking Conference, this year entitled “Macroprudential Policy, Bank Regulation and Financial Stability”. The conference was organised by Professor E Philip Davis and Dr Dilly Karim. With contributions from some of the world’s leading authorities on bank behaviour and financial regulation, this conference provided a critical overview of prudential policy and its role in limiting the risk of financial crisis.
The conference, financed by CBASS at Brunel University, followed on from a grant Davis and Karim had gained from the Bank of England entitled “Bank leverage ratios, competition and risk. Does Basel III go far enough?” – the paper they presented “The Bank Capital-Competition-Risk Nexus – A Global Perspective” having been one of the contributions to that research project.
This high-level conference underlines the development of Brunel as a centre of research and teaching in banking economics, the latter being reflected in the launch of the new BSc in Banking and Finance last academic year to complement the long standing Banking and Finance MSc, both of which are proving highly popular with students.
The conference speakers included senior officials from central banks, namely Laurent Clerc of the Banque de France, Kjersti-Gro Lindquist of the Norges Bank and John Fell from the European Central Bank; experts from the financial services industry – Simon Brennan of Deloittes LLP and Jo Paisley of the Global Association of Risk Professionals; world-leading academics, that is Professor Dimitrios Tsomocos of Oxford University and Professor Claudia Girardone of Essex University; besides Brunel Professor of Banking and Finance E Philip Davis, Senior Lecturer Dr Dilly Karim and PhD student Dennison Noel. Sessions were chaired by Davis, Karim, Brunel Senior Lecturer Dr Ka Kei Chan and Bank of England Senior Economist Dr Michael Straughan.
The conference was organised under three headings; Bank Regulation (Tsomocos, Paisley and Brennan), SME Finance and Banking Sector Risk (Girardone and Davis et al) and Macroprudential Policy (Fell, Noel, Clerc and Lindquist). The discussion raised a rich range of questions for future research and policy consideration, including the following:
What is the appropriate target of macroprudential policy? How is the stance of macroprudential policy to be measured?
Should the remit of macroprudential policy be to focus on banking and the housing market or should it be wider (e.g. commercial property lending, life insurance and asset management)?
Should we regulate firms only or markets as well? How to allow for disintermediation across markets, and subsidiarisation within firms?
What are the trade-offs between macroprudential and monetary policy, and within types of macroprudential (borrower based versus intermediary based)?
Should macroprudential be cyclical (applied in booms) or structural (applied at all times)? Subject to rules or discretion?
Should it apply at loan level or portfolio level?
How important is it that the macroprudential authorities are independent of political control?
Is stress testing becoming overcomplex, costly and failing to fulfil its purpose?
How should financial innovations be handled in the macroprudential context?
Links to the conference presentations are provided below:
(1) Bank regulation
Dimitrios Tsomocos (Professor of Financial Economics, Said Business School, Oxford University) “Optimal Bank Regulation in the Presence of Credit and Run Risk”
Jo Paisley (co-president of the Risk Institute of the Global Association of Risk Professionals (GARP)) “Stress Testing: Past, Present And Future”
Simon Brennan (Director, EMEA Centre for Regulatory Strategy, Deloittes LLP) “The Regulatory Change Transmission Mechanism and Basel 3: A Practitioner Perspective”
(2) SME finance and banking sector risk
Claudia Girardone (Professor of Banking and Finance, Essex Business School, University of Essex) “Financial Fragmentation and SMEs Access to Finance”
E Philip Davis, Dilly Karim and Dennison Noel (Brunel University/NIESR) “The Bank Capital-Competition-Risk Nexus – A Global Perspective”
(3) Macroprudential policy
John Fell (Deputy Director General for Macroprudential Policy and Financial Stability, European Central Bank) “Trade-Offs in Macroprudential Policy”
Dennison Noel (Brunel University) “Bank Profitability, Monetary Policy And Macroprudential Policy”
Laurent Clerc (Director for Research and Risk Analysis, Autorité de Contrôle Prudentiel et de Résolution, Banque de France) “Macropru Beyond Banking: the Case for Life Insurers and Asset Managers”
Kjersti-Gro Lindquist (Special Advisor, Financial Stability, Norges Bank) “Lessons Learned From Using Borrower Based Macroprudential Tools. The Norwegian Case”
Read more: Report on the First Brunel Banking Conference (2018)
Picture 1. Conference Speakers and Chairs
Professor E Philip Davis