Update from the Chair of Court David Roberts: Sir Ron Kalifa
Update on Sir Ron Kalifa
Financial institutions
Macroprudential policy, monetary policy and non-bank financial intermediation
This paper examines the interplay between macroprudential policy, monetary policy and the non-bank financial intermediation (NBFI) sector, drawing on recent research and zooming in particularly on evidence from the euro area2. It documents the growth in the NBFI sector over the past two decades and its particular role in financing the real economy, assesses systemic risks that can emanate from the sector, considers how it interacts with monetary policy, and discusses the implications for macroprudential regulation.
Hidden weaknesses: the role of unrealized losses in monetary policy transmission
This paper investigates how unrealized losses on banks’ amortized cost securities affect monetary policy transmission to bank lending in the euro area. Leveraging the sharp increase in interest rates between 2022 and 2023 and using granular supervisory data on security holdings and loan-level credit register data, we show that a one percentage point increase in the share of unrealized losses on amortized cost securities amplifies the contractionary effect of monetary tightening on lending supply by approximately one percentage point.
Hidden weaknesses: the role of unrealized losses in monetary policy transmission
This paper investigates how unrealized losses on banks’ amortized cost securities affect monetary policy transmission to bank lending in the euro area. Leveraging the sharp increase in interest rates between 2022 and 2023 and using granular supervisory data on security holdings and loan-level credit register data, we show that a one percentage point increase in the share of unrealized losses on amortized cost securities amplifies the contractionary effect of monetary tightening on lending supply by approximately one percentage point.
Macroprudential policy, monetary policy and non-bank financial intermediation
This paper examines the interplay between macroprudential policy, monetary policy and the non-bank financial intermediation (NBFI) sector, drawing on recent research and zooming in particularly on evidence from the euro area2. It documents the growth in the NBFI sector over the past two decades and its particular role in financing the real economy, assesses systemic risks that can emanate from the sector, considers how it interacts with monetary policy, and discusses the implications for macroprudential regulation.
Durability, essentiality, and the transmission of monetary policy to household consumption
In this paper, we examine how different household consumption items respond to monetary policy shocks in the euro area. Specifically, we classify household consumption along two key dimensions: durability and essentiality. Our findings reveal pronounced heterogeneity in responses across these dimensions. First, durable items are highly sensitive to monetary policy shocks, whereas non-durable items exhibit weaker responses. Second, non-essential items react more strongly than essential items.
The impact of capital requirements on bank capital
This paper presents the first causal evidence on how banks adjust their voluntary capital buffers (the capital headroom above the required level) in response to changes in capital requirements. Using granular euro area data and exploiting the threshold-based assignment of Other Systemically Important Institution (O-SII) buffers within a regression discontinuity design, we study the liability side of banks’ balance sheets, complementing the asset-focused literature on lending and risk-taking.
FEDS Paper: Illiquid Homeownership and the Bank of Mom and Dad
Eirik Eylands BrandsaasHousing is the largest asset in U.S. household portfolios, and first-time homebuyers increasingly rely on parental transfers. This paper quantifies the contribution of parental transfers to the homeownership rate of young households. I build and estimate a life-cycle overlapping generations model with housing, where adult children and parents interact without commitment. I find that parental transfers account for 13 percentage points (27%) of young households' homeownership.
FEDS Paper: “Harvest Now Decrypt Later”: Examining Post-Quantum Cryptography and the Data Privacy Risks for Distributed Ledger Networks
Jillian Mascelli and Megan RoddenThis paper analyzes the risks posed by future-state quantum computers, specifically the “harvest now decrypt later” (HNDL) risk. We review foundational concepts of quantum computing to address the present and ongoing threat of HNDL to currently protected data. We use the Bitcoin network as an illustrative example to study the implications of HNDL for distributed ledger cryptocurrency networks that rely upon traditional cryptography.
BIS Triennial Survey of Foreign Exchange and Over-The-Counter Interest Rate Derivatives Markets in April 2025 – UK Data
Results of our latest survey of turnover in the markets for foreign exchange and over-the-counter interest rate derivatives.
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