Corporate Finance

Students will understand the role of banks in the economy and the challenges faced by regulators. They will be able to asses the positive and negative consequences of bank regulation and their impact on financial stability. Professors: 1) David Martinez Miera (Uc3m, PhD) 2) Salvador Bekiaropoulos (ECB)

1. Bank Runs 1.1. The Diamond-Dibvig Setup 1.2. How to prevent bank runs 2. The Role of Informed Financial Intermediaries 2.1. The Hölmstrom-Tirole Setup 2.2. The role of net wealth 2.3. The Debt Overhang problem 2.4. The dark side of deposit insurance 3. Competition and Bank Risk 3.1. The Allen and Gale setup 3.2. The Boyd and De Nicolo critique 4. Bank Capital Regulation 4.1. Risk Insensitive Capital Regulation 4.2. Risk Sensitive Capital Regulation 5. Macroprudential Regulation 5.1. Countercyclical Capital Requirements 5.2. Current developments on macroprudential policies

Teaching will by done using power point and recommended readings. Students will also be expected to read some proposed readings and will have to do some exercises at home and in class. Office hours: On an appointment basis