Question A:
Financial regulators in the US and Europe lack the tools and authority to deter runs on banks by uninsured depositors.
Responses
Responses weighted by each expert's confidence
Question B:
Not guaranteeing uninsured deposits at Silicon Valley Bank in full would have created substantial damage to the US economy.
Responses
Responses weighted by each expert's confidence
Question C:
Fully guaranteeing uninsured deposits at Silicon Valley Bank substantially increases banks’ incentives to engage in excessive risk-taking.
Responses
Responses weighted by each expert's confidence
Question A Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
 Franklin Allen |
Imperial College London | Bio/Vote History | ||
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They could make capital buffers depend on the amount of uninsured deposits. This may be difficult to implement current laws but could presumably be introduced without too much difficulty.
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 Pol Antras |
Harvard | Bio/Vote History | ||
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Raising capital requirements or offering ex-post guarantees could help avoid bank runs, but these solutions entail their own costs.
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 Olivier Blanchard |
Peterson Institute | Bio/Vote History | ||
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This is true by definition
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 Nicholas Bloom |
Stanford | Bio/Vote History | ||
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 Richard William Blundell |
University College London | Did Not Answer | Bio/Vote History | |
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 Maristella Botticini |
Bocconi | Bio/Vote History | ||
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 Agnès Bénassy-Quéré |
Paris School of Economics | Did Not Answer | Bio/Vote History | |
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 Elena Carletti |
Bocconi | Bio/Vote History | ||
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it very much depends on what type of runs we are talking about, if linked to fundamentals or more panic-driven, and if more idyosincratic or systemic
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 Jean-Pierre Danthine |
Paris School of Economics | Bio/Vote History | ||
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 Paul De Grauwe |
LSE | Bio/Vote History | ||
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 Jan Eeckhout |
UPF Barcelona | Bio/Vote History | ||
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 Ernst Fehr |
Universität Zurich | Bio/Vote History | ||
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 Xavier Freixas |
Barcelona GSE | Bio/Vote History | ||
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 Nicola Fuchs-Schündeln |
Goethe-Universität Frankfurt | Bio/Vote History | ||
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 Jordi Galí |
Barcelona GSE | Bio/Vote History | ||
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 Yuriy Gorodnichenko |
Berkeley | Bio/Vote History | ||
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 Rachel Griffith |
University of Manchester | Bio/Vote History | ||
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 Veronica Guerrieri |
Chicago Booth | Bio/Vote History | ||
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 Luigi Guiso |
Einaudi Institute for Economics and Finance | Bio/Vote History | ||
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 Sergei Guriev |
Sciences Po | Bio/Vote History | ||
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 Patrick Honohan |
Trinity College Dublin | Bio/Vote History | ||
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Enforcement of higher capital/TLAC requirements (including discretionary pillar 2) and timely use of resolution powers should be sufficient.
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 Beata Javorcik |
University of Oxford | Bio/Vote History | ||
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 Jan Pieter Krahnen |
Goethe University Frankfurt | Bio/Vote History | ||
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One way to avoid a run would require a safeguard for all holders of demand deposits, whether small or large, individual or corporate. The safeguard could be preferably designed as an insurance scheme, or as an extended liquidity requirement.
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 Botond Kőszegi |
Central European University | Did Not Answer | Bio/Vote History | |
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 Eliana La Ferrara |
Harvard Kennedy | Did Not Answer | Bio/Vote History | |
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 Christian Leuz |
Chicago Booth | Bio/Vote History | ||
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Without insurance, deposits are inherently unstable and runs can occur. However, runs are also connected to asset valuation and risk management. Regulators have extensive tools with respect to both and can therefore prevent many runs.
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 Thierry Mayer |
Sciences-Po | Did Not Answer | Bio/Vote History | |
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 Costas Meghir |
Yale | Bio/Vote History | ||
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 Marco Pagano |
Università di Napoli Federico II | Bio/Vote History | ||
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 Lubos Pastor |
Chicago Booth | Bio/Vote History | ||
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They have applied some of those tools, such as extension of deposit insurance, already.
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 Torsten Persson |
Stockholm University | Did Not Answer | Bio/Vote History | |
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 Christopher Pissarides |
London School of Economics and Political Science | Did Not Answer | Bio/Vote History | |
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 Richard Portes |
London Business School | Bio/Vote History | ||
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 Canice Prendergast |
Chicago Booth | Bio/Vote History | ||
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 Carol Propper |
Imperial College London | Did Not Answer | Bio/Vote History | |
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 Imran Rasul |
University College London | Did Not Answer | Bio/Vote History | |
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 Lucrezia Reichlin |
London Business School | Bio/Vote History | ||
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 Ricardo Reis |
London School of Economics | Bio/Vote History | ||
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Should they deter them in all circumstances?
-see background information here |
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 Rafael Repullo |
CEMFI | Bio/Vote History | ||
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Blanket deposit guarantees are such tools, but they have perverse effects ex-ante. Better to deter runs by tighter (and simpler) regulation and better supervision.
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 Hélène Rey |
London Business School | Did Not Answer | Bio/Vote History | |
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 Antoinette Schoar |
MIT | Bio/Vote History | ||
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 Kjetil Storesletten |
University of Minnesota | Bio/Vote History | ||
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Short of guaranteeing all deposits, there will always be possibilities of runs. There is no legal framework for guaranteeing all deposits
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 Daniel Sturm |
London School of Economics | Bio/Vote History | ||
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 John Van Reenen |
LSE | Bio/Vote History | ||
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 Rick Van der Ploeg |
Oxford | Bio/Vote History | ||
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By demanding buffer holdings from commercial banks and having deposit insurance, runs might be avoided.
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 John Vickers |
Oxford | Bio/Vote History | ||
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They can reduce the probability of runs but not to zero, especially where there are underlying solvency doubts.
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 Hans-Joachim Voth |
University of Zurich | Bio/Vote History | ||
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 Karl Whelan |
University College Dublin | Bio/Vote History | ||
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People have no emotional attachment to the bank they deposit with. If there is even a small chance that you will lose your uninsured deposit, it is optimal at an individual level to withdraw your funds. Governments can't stop this.
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 Charles Wyplosz |
The Graduate Institute Geneva | Bio/Vote History | ||
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No regulation will ever prevent a bank run unless it mandates narrow banking.
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Question B Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
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Franklin Allen |
Imperial College London | Bio/Vote History | ||
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It's difficult to know what would have happened without the implementation guarantee. It's surprising to me that firms/individuals would hold so much uninsured deposits when short term money market funds holding short term Treausries are easily available with a higher return.
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Pol Antras |
Harvard | Bio/Vote History | ||
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Substantial is a vague term, but I think the consequences would have been localized (affecting a few politically powerful economic agents)
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Olivier Blanchard |
Peterson Institute | Bio/Vote History | ||
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The SVB run made salient an issue that uninsured depositors had probably not focused on, and not bailing out would probably have led to large runs on other banks.
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Nicholas Bloom |
Stanford | Bio/Vote History | ||
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Richard William Blundell |
University College London | Did Not Answer | Bio/Vote History | |
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Maristella Botticini |
Bocconi | Bio/Vote History | ||
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Agnès Bénassy-Quéré |
Paris School of Economics | Did Not Answer | Bio/Vote History | |
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Elena Carletti |
Bocconi | Bio/Vote History | ||
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the answer may depend on the status of the other banks in the US, something which regulators should be able to access. But in those situations, it may be better to take more prudent decisions/actions
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Jean-Pierre Danthine |
Paris School of Economics | Bio/Vote History | ||
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Paul De Grauwe |
LSE | Bio/Vote History | ||
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Jan Eeckhout |
UPF Barcelona | Bio/Vote History | ||
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Ernst Fehr |
Universität Zurich | Bio/Vote History | ||
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Xavier Freixas |
Barcelona GSE | Bio/Vote History | ||
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Nicola Fuchs-Schündeln |
Goethe-Universität Frankfurt | Bio/Vote History | ||
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Jordi Galí |
Barcelona GSE | Bio/Vote History | ||
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Yuriy Gorodnichenko |
Berkeley | Bio/Vote History | ||
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Rachel Griffith |
University of Manchester | Bio/Vote History | ||
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Veronica Guerrieri |
Chicago Booth | Bio/Vote History | ||
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Luigi Guiso |
Einaudi Institute for Economics and Finance | Bio/Vote History | ||
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Sergei Guriev |
Sciences Po | Bio/Vote History | ||
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Patrick Honohan |
Trinity College Dublin | Bio/Vote History | ||
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Maybe answer was yes by the time this guarantee was provided. But earlier intervention (months ago) and prompt interim payment of a high percentage to uninsured by FDIC would have stemmed most of the damage.
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Beata Javorcik |
University of Oxford | Bio/Vote History | ||
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Jan Pieter Krahnen |
Goethe University Frankfurt | Bio/Vote History | ||
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I tend to agree here, because of SVB's special business model and the large number of small corporates/start-ups that seem to have stored their funds at the bank.
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Botond Kőszegi |
Central European University | Did Not Answer | Bio/Vote History | |
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Eliana La Ferrara |
Harvard Kennedy | Did Not Answer | Bio/Vote History | |
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Christian Leuz |
Chicago Booth | Bio/Vote History | ||
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Given how many other U.S. had uninsured deposits and unrealized losses for HTM securities, not guaranteeing deposits could have set off a run at many other banks, which would have been difficult to contain. But doing also set a costly precedent.
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Thierry Mayer |
Sciences-Po | Did Not Answer | Bio/Vote History | |
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Costas Meghir |
Yale | Bio/Vote History | ||
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Marco Pagano |
Università di Napoli Federico II | Bio/Vote History | ||
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Lubos Pastor |
Chicago Booth | Bio/Vote History | ||
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I believe that regulators were uncertain about this, too, which is precisely why they stepped in. The risk of potential further bank runs warranted a response.
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Torsten Persson |
Stockholm University | Did Not Answer | Bio/Vote History | |
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Christopher Pissarides |
London School of Economics and Political Science | Did Not Answer | Bio/Vote History | |
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Richard Portes |
London Business School | Bio/Vote History | ||
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Canice Prendergast |
Chicago Booth | Bio/Vote History | ||
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Carol Propper |
Imperial College London | Did Not Answer | Bio/Vote History | |
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Imran Rasul |
University College London | Did Not Answer | Bio/Vote History | |
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Lucrezia Reichlin |
London Business School | Bio/Vote History | ||
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Ricardo Reis |
London School of Economics | Bio/Vote History | ||
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Very hard to asses, so I'm confidently uncertain.
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Rafael Repullo |
CEMFI | Bio/Vote History | ||
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Hélène Rey |
London Business School | Did Not Answer | Bio/Vote History | |
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Antoinette Schoar |
MIT | Bio/Vote History | ||
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As usual there is a trade off between short term and longer term consequences.
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Kjetil Storesletten |
University of Minnesota | Bio/Vote History | ||
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Daniel Sturm |
London School of Economics | Bio/Vote History | ||
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John Van Reenen |
LSE | Bio/Vote History | ||
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Rick Van der Ploeg |
Oxford | Bio/Vote History | ||
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Not having deposit insurance would increase the chance of a bank run
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John Vickers |
Oxford | Bio/Vote History | ||
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The full guarantee (and the generous Bank Term Funding Program) are very questionable unless such damage was in prospect. So I am close to “agreeing”. But SVB was hardly seen as systemic beforehand, and it’s not clear why the authorities did not stick to orthodox haircuts etc.
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Hans-Joachim Voth |
University of Zurich | Bio/Vote History | ||
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Karl Whelan |
University College Dublin | Bio/Vote History | ||
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This decision was big deal because it de facto made all deposits insured. The banking system had been stable for years even with people knowing some deposits were uninsured. The Fed was concerned about contagion but there were plenty of other tools to deal with these problems.
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Charles Wyplosz |
The Graduate Institute Geneva | Bio/Vote History | ||
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It would have hurt and possibly bankrupt several startups, but how much that would have hurt the whole economy? On the other hand, regulation has to be rebuilt, with unknown outcomes.
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Question C Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
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Franklin Allen |
Imperial College London | Bio/Vote History | ||
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The differing statements about which banks the full guarantee will apply to going forward suggests there is indeed a significant issue here.
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Pol Antras |
Harvard | Bio/Vote History | ||
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Failure is a central element of capitalism. A system that amounts to socialism for banks and capitalism for the rest of the economy seems problematic to me.
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Olivier Blanchard |
Peterson Institute | Bio/Vote History | ||
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Full insurance is not desirable. There are good reasons to increase the threshold, say to protect payroll for example, but it has to come with additional regulation and surveillance.
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Nicholas Bloom |
Stanford | Bio/Vote History | ||
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Richard William Blundell |
University College London | Did Not Answer | Bio/Vote History | |
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Maristella Botticini |
Bocconi | Bio/Vote History | ||
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Agnès Bénassy-Quéré |
Paris School of Economics | Did Not Answer | Bio/Vote History | |
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Elena Carletti |
Bocconi | Bio/Vote History | ||
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Jean-Pierre Danthine |
Paris School of Economics | Bio/Vote History | ||
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Paul De Grauwe |
LSE | Bio/Vote History | ||
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Jan Eeckhout |
UPF Barcelona | Bio/Vote History | ||
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Ernst Fehr |
Universität Zurich | Bio/Vote History | ||
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Xavier Freixas |
Barcelona GSE | Bio/Vote History | ||
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Nicola Fuchs-Schündeln |
Goethe-Universität Frankfurt | Bio/Vote History | ||
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Jordi Galí |
Barcelona GSE | Bio/Vote History | ||
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Yuriy Gorodnichenko |
Berkeley | Bio/Vote History | ||
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Rachel Griffith |
University of Manchester | Bio/Vote History | ||
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Veronica Guerrieri |
Chicago Booth | Bio/Vote History | ||
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Luigi Guiso |
Einaudi Institute for Economics and Finance | Bio/Vote History | ||
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Sergei Guriev |
Sciences Po | Bio/Vote History | ||
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Patrick Honohan |
Trinity College Dublin | Bio/Vote History | ||
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Implicit coverage of most large depositors in the US since the GFC probably means that this moral hazard is already present.
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Beata Javorcik |
University of Oxford | Bio/Vote History | ||
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Jan Pieter Krahnen |
Goethe University Frankfurt | Bio/Vote History | ||
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I am ticking "uncertain" because the answer depends on what the regulator imposes in exchange for an unconditional demand deposit insurance. If one follows the European BRRD model, lots of bail-in debt could strengthen market discipline, and avoid an increase in risk taking.
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Botond Kőszegi |
Central European University | Did Not Answer | Bio/Vote History | |
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Eliana La Ferrara |
Harvard Kennedy | Did Not Answer | Bio/Vote History | |
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Christian Leuz |
Chicago Booth | Bio/Vote History | ||
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The extent to which large uninsured depositors really monitor banks is unclear. In SVB's case they did not. Perhaps they didn't because they expected that they would be bailed out. They likely would pay more attention going forward if there had been haircuts in this case.
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Thierry Mayer |
Sciences-Po | Did Not Answer | Bio/Vote History | |
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Costas Meghir |
Yale | Bio/Vote History | ||
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Marco Pagano |
Università di Napoli Federico II | Bio/Vote History | ||
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Lubos Pastor |
Chicago Booth | Bio/Vote History | ||
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The guarantee bailed out depositors, not bank shareholders or managers. (SVB shareholders lost money, SVB managers their jobs.) The guarantee incentivizes depositors to be less careful about where to deposit cash, but it does not incentivize risk-taking by bank decision makers.
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Torsten Persson |
Stockholm University | Did Not Answer | Bio/Vote History | |
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Christopher Pissarides |
London School of Economics and Political Science | Did Not Answer | Bio/Vote History | |
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Richard Portes |
London Business School | Bio/Vote History | ||
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Canice Prendergast |
Chicago Booth | Bio/Vote History | ||
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Carol Propper |
Imperial College London | Did Not Answer | Bio/Vote History | |
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Imran Rasul |
University College London | Did Not Answer | Bio/Vote History | |
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Lucrezia Reichlin |
London Business School | Bio/Vote History | ||
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Ricardo Reis |
London School of Economics | Bio/Vote History | ||
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Yes, at the margin, removed further the threat of a run to discipline management, and made the call option on making a bank in a risky way more valuable. Whether quantitatively significant is harder to judge.
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Rafael Repullo |
CEMFI | Bio/Vote History | ||
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The counterargument is that subsidizing deposits (via underpriced deposit insurance) increases banks’ charter values, which may lead them to be more prudent.
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Hélène Rey |
London Business School | Did Not Answer | Bio/Vote History | |
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Antoinette Schoar |
MIT | Bio/Vote History | ||
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Kjetil Storesletten |
University of Minnesota | Bio/Vote History | ||
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The moral hazard problem of banks' risk taking with deposits is obvious. We need a legal framework to prevent such risk taking and a non-taxpayer way to finance these guarantees
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Daniel Sturm |
London School of Economics | Bio/Vote History | ||
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John Van Reenen |
LSE | Bio/Vote History | ||
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Rick Van der Ploeg |
Oxford | Bio/Vote History | ||
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There is a moral hazard issue, which I hope to be less bad than the cure.
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John Vickers |
Oxford | Bio/Vote History | ||
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Unless policy responds robustly to strengthen regulation — notably by higher equity capital requirements — this will increase moral hazard
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Hans-Joachim Voth |
University of Zurich | Bio/Vote History | ||
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Karl Whelan |
University College Dublin | Bio/Vote History | ||
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Banks already have plenty of incentives to take too much risk if allowed by supervisors. I'm not sure the knowledge that uninsured depositors could lose money has ever really constrained risk taking by bankers.
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Charles Wyplosz |
The Graduate Institute Geneva | Bio/Vote History | ||
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This is a tautology!
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