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Lev Ratnovski

A walk down Lombard Street : essays on banking

The banking industry undergoes dramatic change. The change is driven by increased competition (both within the industry and from non-banks) and by fi…nancial innovation. As a result, banks increasingly depart from the traditional model of conservative retail business, and adopt innovative funding and lending strategies. While some of those strategies undoubtedly increase efficiency and contribute to social welfare, others (or even the same ones!) also expose the banking system to new types of risks. The dangers associated with novel and often complex banking activities were abundantly illustrated during the recent credit market turmoil.

This thesis consists of three essays in banking. The first two deal with bank liquidity risk. The third addresses the issue of bank credit standards.