As part of the Vilfredo Pareto Research Seminar series, the International Economics Department at the Graduate Institute is pleased to invite you to a public talk given by Elena Carletti, Full Professor of Finance at Bocconi University.
She will present her work, joint with Agnese Leonello and Robert Marquez, titled Loan Guarantees, Bank Underwriting Policies and Financial Fragility.
Abstract: Loan guarantees often represent a form of government intervention designed to support bank lending and avoid credit market freezes. However, their use has given rise to concerns as to how they may affect banks' risk-taking incentives. In a model of financial fragility that incorporates bank capital and a portfolio choice problem, we analyze the effects of loan guarantees on banks' underwriting standards and run risk. We show that loan guarantees reduce run risk and improve banks' underwriting standards except possibly for poorly capitalized banks. We highlight a novel feedback effect between banks' underwriting choices and depositors' run decisions.
About the speaker
Elena Carletti is a Full Professor of Finance at Bocconi University since October 2013. She is a member of the Advisory Scientific Committee of the European Systemic Risk Board (ESRB) and a Member of the Board of Directors of Unicredit. She is also Vice-President of the European Financial Association (EFA) and the Program Chair for EFA 2021. Her main research areas are financial intermediation and regulation, corporate governance and sovereign debt.