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Interest Rate Risk and Cross-Sectional Effects of Micro-Prudential Regulation -- by Juliane Begenau, Vadim Elenev, Tim Landvoigt
A new academic paper by Begenau, Elenev, and Landvoigt examines financial stability risks stemming from banks' interest rate exposure and uninsured deposit funding. Using a heterogeneous bank model with endogenous run risk, the research replicates empirical patterns such as the concentration of uninsured deposits in larger banks. The study finds that tightening capital requirements significantly reduces run risk, while higher liquidity requirements targeting uninsured deposits are effective when