Dissertation: Bank liquidity creation can influence the fragility of the financial system

Sara Yasar
How does bank liquidity creation affect the overall fragility of the banking sector and the systemic risk posed by individual financial institutions? Does bank liquidity creation influence technological innovation? And what are the real consequences of bank supervision to financial regulators?

According to Sara Yasar’s doctoral dissertation to be examined at the University of Vaasa on December 8, 2021, bank liquidity creation decreases systemic risk at the individual bank level in the U.S. Nevertheless, the results also indicate that liquidity creation can strengthen the systemic linkage of individual banks to severe shocks in the financial system.

In addition, Yasar shows that liquidity creation by the U.S. banks can stymie firms’ technological innovation as measured by patent quantity and quality, meaning that bank liquidity creation, on average, has a negative impact on innovation. However, this finding depends on the firm’s industry and the amount of tangible assets.

When examining how different supervisory practices affect bank liquidity creation in 27 European countries, she finds that the traditional approach to bank supervision that entails strengthening official supervisory authorities tends to decrease bank liquidity creation. Moreover, a supervisory strategy that strengthens private sector monitoring of banks lowers bank liquidity risk.

– Putting all banks under common regulatory and supervisory practices is difficult, as banks operating in certain environments may be exposed to higher risks, says Sara Yasar who is currently working at the European Central Bank.

Doctoral dissertation

Sara Yasar (2021) Essays on Bank Liquidity Creation. Acta Wasaensia 470. Väitöskirja. Doctoral dissertation. Vaasan yliopisto. University of Vaasa.

Publication pdf: http://urn.fi/URN:ISBN:978-952-476-987-7

Public defence

The public examination of M.Sc. Sara Yasar’s doctoral dissertation "Essays on Bank Liquidity Creationwill be held on Wednesday 8.12.2021 at 14 at the University of Vaasa.

The defence will be organised online: https://uwasa.zoom.us/j/61017077868?pwd=cmhIRSttam1MdTFmbkk4K2R5aUpUUT09

Professor Gonul Colak (Hanken School of Economics) will act as the opponent and Professor Sami Vähämaa as the custos.

Further information

Sara Yasar, tel +358 442386407, email sara.yasar@uwasa.fi

Sara Yasar was born in 1989 in Kazeroon, Iran. She holds a Master’s Degree in Finance from the University of Vaasa. She is currently employed by the European Central Bank as a Ph.D. trainee in the Directorate General Macroprudential Policy and Financial Stability.

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