Intended for

Academic economists and central bankers.

Prerequisites

Participants should be comfortable with Master level courses in microeconomics.

Overview

The course provides an overview of some recent banking literature, with especial reference to the role of market power, regulation, and the stance of monetary policy on risk-taking. The course starts with a review of the industrial organization of banking, focusing on the determination of deposit and loan rates, and the implications for bank profitability, under different market structures that range from perfect competition to monopoly. The second session examines the possible existence of a trade-off between competition and financial stability, and the potential contribution of bank capital regulation to ameliorate it. The third session deals with the transmission of monetary policy through the banking system, covering among other things the possible existence of a reversal rate below which further reductions in the policy rate contract lending. The fourth session discusses the risk-taking channel of monetary policy, focusing on the role of market power and the effect of macroprudential policies. The last session reviews research on topics related to the regulation of the Basel Committee such as its loan pricing effects, the rationale for the cyclical adjustment of risk-sensitive capital requirements, and the optimal regulation of liquidity risk. Throughout the course emphasis is placed on the critical examination of the models proposed to address the various topics.

Topics

The industrial organization of banking
Competition, regulation, and bank risk-taking
Banks and the transmission of monetary policy
The risk-taking channel of monetary policy
Topics on the regulation of the Basel Committee

Rafael Repullo is Professor of Economics and Director of the Centre for Monetary and Financial Studies (CEMFI). He is Fellow of the Econometric Society and of the European Economic Association, and Research Fellow of the Centre for Economic Policy Research (CEPR). He has a PhD in Economics from the London School of Economics (LSE), and has worked in the Department of Economics of the LSE and the Research Department of the Bank of Spain. He has been President of the Spanish Economic Association, Executive Vice-President of the Econometric Society, member of the Executive Committee of the Econometric Society and of the European Economic Association, Chair of the Scientific Council of Toulouse School of Economics, and Co-Editor of the International Journal of Central Banking. He has also been a Houblon-Norman Fellow at the Bank of England and a Wim Duisenberg Research Fellow at the European Central Bank. His recent research is focused in the area of banking, where he has written on topics such as central banks as lenders of last resort, competition and risk-taking in banking, the procyclical effects of bank capital regulation, the institutional design of bank supervision, the risk-taking channel of monetary policy, and the relationship between financial frictions and aggregate fluctuations.