The SAFE Policy Center and the Centre for Economic Policy Research (CEPR) organize and cordially invite you to attend a web seminar
Financial Resilience as Flood Containment
Enrico Perotti, University of Amsterdam and CEPR
Discussant: Mathias Dewatripont, Solvay Brussels School of Economics & Management (SBS-EM) and CEPR
Moderator: Loriana Pelizzon, Leibniz Institute SAFE and CEPR
13 February 2025, 4:00 – 5:00 p.m., via Zoom
Abstract:
The supervisory response to the March 2023 bank runs has been criticized for excessive inertia, with regulatory forbearance often leading to worse losses and chaotic defaults, leaving bailouts as the only remedy. Current corrective tools under Pillar II are rarely used due to fears of triggering runs, creating an “intervention gap” until defaults force resolution. This undermines the resilience of even viable banks under Basel III norms.
The paper reviews tools for enhancing resilience, such as usable buffers, prepositioned collateral, and redemption charges, drawing on analogies with dam flood control. As flood management relies on timely measures to stem overflows, banking resilience requires prompt interventions to disrupt run incentives and contain outflows. Tools like contingent redemption charges and AT1 debt conversion can stall remedial action, offering banks a credible path to recovery over resolution and bailout.
