Victoria Ivashina (HBS)

Victoria Ivashina will present the following paper (click link in title for paper).

Bank Runs and Interest Rates: A Revolving Lines Perspective

with Falk Brauning

Abstract: Revolving credit is at the core of the banking business. Corporate revolving credit lines are demandable claims; thus, similar to a traditional bank run on deposits, sudden widespread drawdowns on credit lines can be destabilizing to the banking sector. However, we show that, unlike deposits, credit line utilization has a large interest rate sensitivity. A revolving line run is less likely in a high-interest-rate environment, but can introduce vulnerability when the Fed cuts the interest rate to support a weak banking sector.

The seminar will be followed by drinks at The Ridley (lobby of the Draftsman Hotel)