Video

Highlights

  • Insolvency and Illiquidity During Financial Crises

    Charles Calomiris, Columbia University; Donald Kohn: Liquidity crises have two parts: an insolvency trigger and then the question of institutional exposure to that shock. If banks weren’t allowed to let their market value ratios drop to dangerous levels then the question of exposure would not have been relevant.

    Donald Kohn

  • Challenges of Conducting Cost-Benefit Analysis on Liquidity Regulations

    Marc Saidenberg, Ernst & Young; Adam Gilbert, JPMorgan Chase: There are a variety of challenges to conducting accurate cost-benefit analysis when evaluating liquidity regulations. Thus, it’s important that regulators are clear about what the intended effects of regulations are and that changes to policy can be made after they are fixed.

  • Liquidity Needs in the Post-Crisis World

    Mary Miller, U.S. Department of theTreasury: It is essential that policymakers monitor supply and demand of high quality liquid assets. A variety of factors in the near term related to improving economic conditions, new regulations, and ongoing structural changes in markets raise questions over where market participants will source liquidity in the future.

  • Single Point of Entry and the Risk of Illiquidity

    Steven Strongin, Goldman Sachs; Paul Saltzman, The Clearing House: Widespread uncertainty over how the FDIC’s new single point of entry power might create problems in short-term funding markets were that power needed to be drawn on. Moreover, the failure of a large institution would likely create a risk of contagion that regulators would need to contain.

  • Unanticipated Challenges in the Financial Crisis

    Ben Bernanke: A variety of changes in the financial system over the past several decades had left the Fed’s legal powers behind in the recent crisis. The Fed had to be innovative in responding to these changes as well as other unanticipated challenges, such as discount window stigma, during the crisis.

    Ben S. Bernanke

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Summary

Liquidity is central to the stability of the financial system. A “run on the bank” can kill even sound institutions if they cannot readily find the cash to cover short-term demands. Further, scrambling to find cash can force some players to sell assets at distressed prices and this, in turn, may trigger insolvencies and failures. A key role of central banks is to be a “lender of last resort” in times of crisis to prevent liquidity problems from triggering a full-fledged financial crisis. A resilient financial system needs rules to ensure financial institutions maintain adequate liquidity and that the central banks provide a backstop for crisis situations.

On April 30, the Initiative on Business and Public Policy at Brookings hosted a day-long event addressing these topics. Many high-level experts from industry, academia, and government came together to consider key issues related to liquidity and the lender of last resort, including: the function and liquidity adequacy of banks; the liquidity coverage ratio, net stable funding ratio, and short-term wholesale funding market reform; liquidity needs in the post-crisis world; and liquidity provision for bank resolution.

Event Agenda

  • 9:00

    Welcome and Opening Remarks

  • 9:15

    Lender of Last Resort: Examining the Function and Liquidity Adequacy of Banks

  • 11:00

    Liquidity Coverage Ratio, Net Stable Funding Ratio and Short-Term Wholesale Funding Market Reform

    • Moderator

    • Paul R. Ackerman

      Senior Executive Vice President and Treasurer

      Wells Fargo & Company

    • Adam Gilbert

      Managing Director

      JPMorgan Chase & Co.

    • Marc Saidenberg

      Principal

      Ernst & Young LLP

    • Mark E. Van Der Weide

      Deputy Director, Division of Banking Supervision and Regulation

      Board of Governors of the Federal Reserve System

  • 12:30

    Lunch Keynote

    • Mary Miller

      Under Secretary for Domestic Finance

      U.S. Department of the Treasury

  • 1:45

    Liquidity Needs in the Post-Crisis World and Liquidity Provision for Bank Resolution

    • Moderator

      Donald Kohn

      Senior Fellow, Economic Studies

      Robert S. Kerr Senior Fellow

    • Randall D. Guynn

      Partner

      Davis Polk & Wardwell

    • Paul H. Kupiec

      Resident Scholar

      American Enterprise Institute

    • Paul Saltzman

      President, The Clearing House Association;

      Executive Vice President and General Counsel, The Clearing House Payments Company

    • Marcus Stanley

      Policy Director

      Americans for Financial Reform

    • Steven H. Strongin

      Head of Goldman Sachs Global Investment Research

      Goldman Sachs

  • 3:30

    Closing Keynote Address

Details

April 30, 2014

9:00 AM - 4:00 PM EDT

Brookings Institution

Falk Auditorium

1775 Massachusetts Avenue NW

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