Do the current capital requirements provide the right buffer? A number of changes have been made to capital requirements since the financial crisis. The revisions include higher equity capital requirements as a result of changes to the Basel Accords and the adoption of stress testing. On the debt capital side, banks have been required to issue debt that converts to equity either on a going-concern or gone-concern basis. This session will ask if these equity requirements sufficiently fortify the banking and financial system to withstand the next big financial shock. If the shock overwhelms the increased equity, can we rely on the debt capital requirements to adequately recapitalize failing banks without a government-funded bailout? Is there another way to provide the desired protection from financial shocks at a lower cost?
Is the financial system's backbone, the U.S. dollar, also a transmitter of stress? The U.S. dollar retains a central role in the global financial system, both in payments and capital markets. This reliance on the dollar provides some significant efficiencies during normal times, but it also means that stresses in U.S. dollar markets can have a global impact. This session examines whether liquidity in U.S. dollar markets is overpromised and underpriced. Have changes in regulation that seek to protect specific markets and institutions merely shifted the stresses into other markets? To what extent has the Fed become obligated to become the de facto global central bank in order to satisfy its domestic responsibilities?
Is digital currency a valuable innovation or a cause of future crossed signals? Private digital currency moved beyond the world of crypto and blockchain aficionados into serious policy discussions with Facebook's announcement of Libra. Libra raised the possibility almost overnight of a private digital currency backed by assets denominated in sovereign currencies (or stablecoins) becoming a material factor in global financial systems. It also helped strengthen interest in digital currencies issued by central banks. This session will address some of the financial stability and monetary policy issues that would arise in a world with globally significant stablecoins and/or central bank digital currency.
Does monetary policy still have the juice to keep the economy from dimming? Central banks throughout the developed world have adopted some combination of very low policy rates and balance sheet expansion to help satisfy their mandates, raising the question of whether the ability of central banks to spur activity is dimming. This session asks if central banks' tools still allow them to combat the next recession.