Banking, Liquidity and Financial Regulation

In the recent financial crisis, public authorities could not rely on models of financial stability for their regulatory interventions. Our mission is to develop research and advanced teaching on financial stability, using four different approaches: economic theory, empirical research, experiments and legal research. Banking, Liquidity and Financial Regulation also investigates in important traditional areas such as interbank money markets, and develops new concepts to accompany the trend of increased competition and consumer protection in investment services.

Research projects

Exemplary project: Capital Regulation and Credit Fluctuations (J.-C. Rochet, H. Gersbach)

The implementation of counter-cyclical capital ratios is a central theme of macroprudential regulation. This term characterizes the approach to financial regulation aimed to mitigate the risk of the financial system as a whole (or systemic risk). In the aftermath of the recent financial crisis, there is a growing consensus among policymakers and economic researchers about the need to re-orient the regulatory framework towards a macroprudential perspective.

In a recent theoretical work, we provide a rationale for imposing counter-cyclical capital ratios on banks. Such ratios have recently been activated in Switzerland. They are meant to dampen credit cycles which are characterized by an excessive fluctuation of bank credits, output, asset prices or wages. Imposing a (stricter) capital ratio in booms increases expected output and can be beneficial to all agents in the economy. Our findings show that counter-cyclical capital ratios are indeed an effective stabilization tool.

Selected research projects and programs

Connections to courses

Banking, Liquidity and Financial Regulation addresses students who are interested in the analysis of problems related to financial (in-)stability. This issue can be addressed both at the individual (micro) level (e.g. proper risk management within the firm) as well as the (global) macro level (e.g. macroprudential regulation aimed at mitigating systemic risk). In the aftermath of the financial crisis, there is a clear need for people to address and understand the relevant but complex topic of “financial stability”. Students who focus on this area get the education necessary to work for the banking industry, for regulators (such as FINMA or the Swiss National Bank) as well as for international organizations (such as BIS, IMF, OECD). The following list provides examples of courses particularly related to Banking, Liquidity and Financial Regulation.

List of courses

More detailed information on each module can be found by copying the 8-digit code into the search field of the University’s course catalogue.

Course catalogue

Bachelor's level

Banking BOEC0319
Banking Game: Gesamtführung einer Bank BOEC0068
Verantwortung in den Finanzmärkten - eine interdisziplinäre Perspektive BOEC0321
Startup Seminar Banking & Finance 2.0 BOEC0325
Banking: Structured Products BOEC0094
Banking: Regulation and Supervision BOEC0206
Game Theory: Applications to Banking and Finance BOEC0302
Fixed Income Markets BOEC0208

Master's level

ME2: Microeconomic Theory of the Firm MOEC0203 
Seminar in Information Economics and Contract Theory MOEC0377
Groups in Economic Decision-Making MOEC0304
Behavioral Finance and Private Banking MOEC0209
Advanced Banking MFOEC151
History of Economics and Banking MFOEC164
Theory of Banking and Financial Intermediation MFOEC142
Krisen und Krisenmanagement in Europa MOEC0369

Doctoral level

Advanced Microeconomics: Mechanism Design DOEC0320
Research Seminar in Contract Theory and Banking DOEC0443

Any interested doctoral student can also take advantage of the advanced PhD courses offered by the Swiss Finance Institute at various research institutions across Switzerland.

Faculty members involved

The following Faculty members research and/or teach in Banking, Liquidity and Financial Regulation.

Department of Economics (IVW)

Prof. Dr. Christian Ewerhart