Regulatory forbearance in stress testing, CoCo conversion and bank resolution

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Meeting Code: 
5700

We aim at a small workshop with high-quality theoretical and empirical papers on the theme of regulatory forbearance.

Stress tests are used to enforce capital requirements under skewed risk scenarios. Their effectiveness depends on timely recapitalisation, a process hindered by limited information and moral hazard. As shareholders of highly leveraged banks are reluctant to recapitalise, regulators need to intervene vigorously as needed, activating going-concern CoCo conversion or initiating resolution, a controlled form of bankruptcy.

Regulatory forbearance arises when policymakers gamble with bank solvency out of concerns for market stability, short-term reputation or fiscal costs. It may take forms such as a delay in debt conversion or a weak stress test methodology.

In general, a weaker intervention capacity affects the private incentives to recapitalise and enables private risk taking, leading to larger fiscal costs.

Funding

Accommodation expenses will be covered for participants in the programme. Participants are encouraged to fund their travel expenses from other sources as only limited funding is available. Where financial support is offered, this will be in accordance with CEPR's travel expenses guidelines (http://cepr.org/sites/default/files/CEPR%20TRVL%20GUIDELINES%202017.pdf).

How to apply

To respond, please visit: https://portal.cepr.org/regulatory-forbearance-workshop and indicate whether or not you wish to present a paper or would be willing to act as a discussant. The deadline for replies is 6 p.m. (GMT), Thursday 1 March 2018. If you have any difficulties registering for this meeting, please contact Amanda Vincent-Rous, CEPR Events team at [email protected] for assistance (with subject header "5700 - Regulatory Forbearance").

Scientific committee

Franklin Allen (Imperial College London and CEPR)

Charlie Calomiris (Columbia University)

Elena Carletti (Bocconi University and CEPR)

Paul Glasserman (Columbia University)

Martin Oehmke (Columbia University)

Rafael Repullo (CEMFI and CEPR)

Tano Santos (Columbia University and CEPR)

Organisers

Roger Laeven (University of Amsterdam)

Enrico Perotti (University of Amsterdam and CEPR)

Sweder van Wijnbergen (University of Amsterdam and CEPR)

This workshop is part of CEPR’s Financial Regulation Initiative. For more information: https://fri.cepr.org/

Type: 
Workshop
Meeting Date: 
Friday, June 8, 2018

Programme Areas:

Meeting Venue:

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