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Reciprocal deposit networks provide means to exceed FDIC’s $250,000 account cap
Because of their prominence, reciprocal deposits are important in the broader discussion of deposit insurance. Though they have the potential to increase banks’ moral hazard, they also bring increased trust and safety to the banking system.
Decline in bank stress likely to continue as interest rates normalize
While the key measures suggest that conditions that hamper a bank’s resilience to economic adversity are marginally higher than before the pandemic in 2019, we expect further declines in bank stress levels as interest rates normalize.
Working Paper
Asset Manager Commonality and Portfolio Similarity
Asset managers are increasingly influential in financial markets. We use new regulatory as well as manually collected data on asset managers of life insurers, the largest institutional investors of corporate bonds, and find that insurers with the same asset managers have more similar portfolios and trades. This similarity increases further if the asset manager actively oversees the majority of both insurers’ assets. Moreover, the effect intensifies the longer insurers share the same asset manager. Nevertheless, the effect is primarily driven by purchases rather than sales and the resulting ...