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Discussion Paper
Does Bank Monitoring Affect Loan Repayment?
Branzoli, Nicola; Fringuellotti, Fulvia (2022-12-02)
Banks monitor borrowers after originating loans to reduce moral hazard and prevent loan losses. While monitoring represents an important activity of bank business, evidence on its effect on loan repayment is scant. In this post, which is based on our recent paper, we shed light on whether bank monitoring fosters loan repayment and to what extent it does so.
Liberty Street Economics , Paper 20221202

Working Paper
Diamond-Dybvig and Beyond: On the Instability of Banking
Gu, Chao; Monnet, Cyril; Nosal, Ed; Wright, Randall (2023-02-13)
Are financial intermediaries—in particular, banks—inherently unstable or fragile, and if so, why? We address this question theoretically by analyzing whether model economies with financial intermediation are more prone than those without it to multiple, cyclic, or stochastic equilibria. We consider several formalizations: insurance-based banking, models with reputational considerations, those with fixed costs and delegated investment, and those where bank liabilities serve as payment instruments. Importantly for the issue at hand, in each case banking arrangements arise endogenously. ...
FRB Atlanta Working Paper , Paper 2023-02

Speech
Banks and the Rise of Nonbanks in Credit Markets
Cetorelli, Nicola (2025-05-19)
Presentation at the Federal Reserve Bank of Atlanta's 29th Annual Financial Markets Conference 2025: Financial Intermediation in Transition, delivered by Nicola Cetorelli, Head of Financial Intermediation, Federal Reserve Bank of New York.
Speech

Working Paper
Financing Constraints, Firm Dynamics, and International Trade
Verani, Stéphane; Gross, Till (2012-08)
There is growing empirical support for the conjecture that access to credit is an important determinant of firms' export decisions. We study a multi-country general equilibrium economy in which entrepreneurs and lenders engage in long-term credit relationships. Financial constraints arise in consequence of financials contracts that are optimal given information asymmetry. Consistent with empirical regularities, as firm age and size increase, the model implies decreasing mean and variance of fi rm growth and increasing fi rm survival. Exporters are larger, their survival in international ...
Finance and Economics Discussion Series , Paper 2012-68

Working Paper
The time-varying price of financial intermediation in the mortgage market
Lo, Stephanie; Willen, Paul S.; Fuster, Andreas (2017-01-01)
The U.S. mortgage market links homeowners with savers all over the world. In this paper, we ask how much of the flow of money from savers to borrowers actually goes to the intermediaries that facilitate these transactions. Based on a new methodology and a new administrative dataset, we find that the price of intermediation, measured as a fraction of the loan amount at origination, is large?142 basis points on average over the 2008?2014 period. At daily frequencies, intermediaries pass on the price changes in the secondary market to borrowers in the primary market almost completely. At monthly ...
Working Papers , Paper 16-28

Report
Shadow bank monitoring
Cetorelli, Nicola; Ashcraft, Adam B.; Adrian, Tobias (2013-09-01)
We provide a framework for monitoring the shadow banking system. The shadow banking system consists of a web of specialized financial institutions that conduct credit, maturity, and liquidity transformation without direct, explicit access to public backstops. The lack of such access to sources of government liquidity and credit backstops makes shadow banks inherently fragile. Shadow banking activities are often intertwined with core regulated institutions such as bank holding companies, security brokers and dealers, and insurance companies. These interconnections of shadow banks with other ...
Staff Reports , Paper 638

Working Paper
Do Costly Internal Equity Injections Reveal Bank Expectations about Post-Crisis Real Outcomes?
Gupta, Arun; Sapriza, Horacio (2022-12-21)
We construct a novel signal of bank expectations utilizing confidential data and a regulatory constraint imposed on bank internal capital markets during the 2008 crisis that made internal equity injections to commercial bank subsidiaries difficult to reverse. When the US government initiated a $176 billion recapitalization program during the crisis, this constraint made it costly ex-ante for multi-bank holding companies (MBHC) to use these funds for the purpose of recapitalizing subsidiaries against future anticipated losses; in contrast, lending the funds to subsidiaries was exempt from the ...
Working Paper , Paper 23-03

Report
Taking orders and taking notes: dealer information sharing in financial markets
Boyarchenko, Nina; Lucca, David O.; Veldkamp, Laura (2015-04-01)
The use of order flow information by financial firms has come to the forefront of the regulatory debate. Central to this discussion is whether a dealer who acquires information by taking client orders can share that information. We explore how information sharing affects dealers, clients, and issuer revenues in U.S. Treasury auctions. Because one cannot observe alternative information regimes, we build a model, calibrate it to auction results data, and use it to quantify counterfactuals. We estimate that yearly auction revenues with full information sharing (with clients and between dealers) ...
Staff Reports , Paper 726

Speech
A perspective on supervisory objectives and trade-offs: keynote remarks at Conference on “Optimal Bank Capital Regulation”
Stiroh, Kevin J. (2017-02-23)
Keynote Remarks at Columbia University?s School of International and Public Affairs and the Clearing House Association Conference on ?Optimal Bank Capital Regulation,? Columbia University, New York.
Speech , Paper 234

Discussion Paper
The Origins of Market Power in DeFi
Azar, Pablo D.; Casillas, Adrian; Farboodi, Maryam (2025-04-21)
In our previous Liberty Street Economics post, we introduced the decentralized finance (DeFi) intermediation chain and explained how various players have emerged as key intermediaries in the Ethereum ecosystem. In this post, we summarize the empirical results in our new Staff Report that explains how the need for transaction privacy across the DeFi intermediation chain gives rise to intermediaries’ market power.
Liberty Street Economics , Paper 20250421

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