Bank supervisors, industry analysts, and academic researchers rely on a range of metrics to track the health of both individual banks and the banking system as a whole. Many of these metrics focus on bank solvency—the likelihood that a bank will be able to repay its obligations and thus retain its funding and continue to supply services to consumers, businesses, and other financial institutions. We draw on our recent research to describe a new solvency metric that is more forward-looking, m...| Liberty Street Economics
Global risk conditions, along with monetary policy in major advanced economies, have historically been major drivers of cross-border capital flows and the global financial cycle. So what happens to these flows when risk sentiment changes? In this post, we examine how the sensitivity to risk of global financial flows changed following the global financial crisis (GFC). We find that while the risk sensitivity of cross-border bank loans (CBL) was lower following the GFC, that of international de...| Liberty Street Economics
A look at bank runs and how they have been a consequence of imminent failure, rather than the original cause, for bank failures in the U.S.| Liberty Street Economics
A look at why U.S. banks fail, using a study of more than 5,000 bank failures to understand if they are caused by bank runs or deteriorating solvency.| Liberty Street Economics
The Fed softened its stress tests, which freed up bank capital, then came the Basel Endgame which would eat it all up again. Now, with the Endgame in doubt, JP Morgan has deployed its excess capital in trading bets| Risky Finance