Call for Papers

Submission deadline: 1 September 2023

Annual research workshop on Systemic Liquidity Risks

Analysis Working Group and the Macroprudential Analysis Group

11 October 2023

Background

Liquidity risks have emerged as a critical area of concern over the last year, demanding increased attention from researchers and policymakers. Flareups of stress in the UK pension fund sector, alongside banking stress in the US and Switzerland, have illustrated how widespread financial instability can stem from sudden changes in market or funding liquidity. In this respect, there is a need for greater understanding of liquidity risks that have a systemic dimension, alongside traditional regulation oriented toward safety and soundness of financial institutions. This requires a surveillance framework covering main transmission channels, cross jurisdictional spillovers and interlinkages across the financial system.

While systemic liquidity risks are not a new phenomenon, the mechanics of recent incidents underscore their evolving nature. This includes structural factors such as the growth and interconnectedness of non-bank financial institutions, emerging channels accompanying increased reliance on market-based sources of funding, and adequacy of the global regulatory framework, noting implications of the rapid advance in digitalisation and digital finance and related new dimensions to these risks. This also includes cyclical factors tied to the macroeconomy, such as monetary policy normalisation alongside shifting fiscal policy.

We are pleased to announce a research workshop on Systemic Liquidity Risks aimed at sharpening our understanding of the above issues, jointly organised by the ESRB Analysis Working Group (AWG) and Eurosystem Macroprudential Analysis Group (MPAG). We invite original research papers that provide insights into the nature, measurement, and management of systemic liquidity risks in this evolving financial landscape.

Objectives

This primary aim of this workshop is to facilitate dialogue and exchange of ideas between policymakers and researchers on systemic liquidity risks in the current financial environment. Researchers will share their latest work and analytical tools, providing new insights to policymakers. Policymakers, in turn, will provide researchers with insights into practical challenges, enriching their research. Ultimately the workshop aims to promote collaborative efforts for better management of systemic liquidity risks, contributing to improving the stability of the financial system and complementing the significant advances in microprudential management of liquidity risks made over the past decade.

Topics

• Surveillance indicators for identifying, measuring and monitoring liquidity risks

The evolving financial landscape necessitates the development of adept surveillance indicators that can effectively identify and monitor liquidity risks relevant for financial stability. Surveillance approaches should consider interactions among banks, non-bank financial institutions and other market participants. We welcome any research exploring innovative methodologies and tools aimed at measuring and monitoring liquidity risks, including those that provide early identification of systemic liquidity risk events.

• Transmission channels and amplification effects

Repo markets, central counterparties and margin calls play integral roles in the financial system particularly in the present environment of increasing interest rates. We welcome any research contributions relating to the functioning of repo markets and margin calls, central counterparties, the role of market funding for banks, interest rate risks in the financial system and sensitivity of funding costs, collateral management and asset encumbrance and funding mismatches.

• Contagion and spillover effects of liquidity in the financial system

We welcome any research on structural aspects of the European financial system that could amplify the impact of liquidity effects across markets and jurisdictions. This could include, for instance, spillovers across the financial system and across countries, the role of non-bank financial institutions, market-based finance and the growth of digitalisation and technology. These contributions should help to better identify the sources, concentrations and interlinkages of liquidity within the financial system.

Submissions

The organisers welcome submissions from authors working for members of the European Systemic Risk Board (ESRB), European System of Central Banks (ESCB) or the Single Supervisory Mechanism (SSM), members of other EU/international financial institutions, and academics with a research interest in the issues outlined above.

Interested authors should send either completed draft papers (strongly preferred) or extended abstracts to EURiskWorkshop@ecb.europa.eu by 1 September 2023 with the email subject “AWG-MPAG workshop submission”. All submissions should be in English (in PDF format) and should include an abstract, as well as the name and email address of a nominated author who could present the paper.

Selection process and workshop attendance

The organising committee will review all submissions received by the deadline, looking at their quality, their policy relevance and the level of interest that they are likely to generate. The committee will also take the overall balance of the workshop in terms of subject matter and approaches into account. All authors will be notified before 10 September 2023 as to whether their papers have been accepted.

In addition to presenters and other speakers, invitations to attend the workshop are also extended to:

• Members of AWG and MPAG
• Members of any department within the ESRB that is represented in the substructures of the Advisory Technical Committee as well as members contributing to the work of the Advisory Scientific Committee.
• Members of any department within the ESCB and the SSM that is represented in the substructures of the Eurosystem Financial Stability Committee working on issues related to the theme of the workshop.
• Employees of any EU/international financial institutions (e.g., the Bank for International Settlements or the International Monetary Fund) who are working on issues related to the theme of the workshop.

Space contraints may mean that organisers need to limit the number of participants from each institution (not including presenters of accepted papers and disccussants)

Expenses

The travel and accomodation expenses of all attendees, presenters and discussants should be covered by their own organisations. No participation fees will be charged.

Note that this will be a hybrid event where online participation will also be possible.

Organising committee

• Paul Hiebert (AWG and MPAG Co-Chair)
• Katja Taipalus (AWG and MPAG Co-Chair)
• Tuomas Peltonen (ESRB Secretariat)
• Jonathan Rice (AWG Secretary)
• Marco van Hengel (MPAG Secretary)
• Shirley Simmons-Nocca (ESRB Secretariat)
• Anne McTaggart (MPAG Secretariat)