Financial Architecture and Financial Stability

30 Pages Posted: 4 May 2021 Last revised: 27 May 2021

See all articles by Franklin Allen

Franklin Allen

Imperial College London

Ansgar Walther

Imperial College London; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: December 15, 2020

Abstract

This paper studies the links between financial stability and the architecture of financial systems. We review the existing literature and provide organizing frameworks for analyzing three empirically important aspects of financial architecture: The rise of non-bank financial intermediaries, the regulatory response to these structural changes, and the emergence of complex interbank networks. One of our main new results is a necessary and sufficient condition for whether non-bank intermediaries are immune to runs in an extended version of the Diamond-Dybvig model.

Keywords: Financial stability, financial crises, shadow banks, bank regulation, networks

JEL Classification: G01, G21, G23, G28

Suggested Citation

Allen, Franklin and Walther, Ansgar, Financial Architecture and Financial Stability (December 15, 2020). Available at SSRN: https://ssrn.com/abstract=3836746 or http://dx.doi.org/10.2139/ssrn.3836746

Franklin Allen

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

Ansgar Walther (Contact Author)

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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