Financial sector balance sheets and vulnerability to financial crises

Workshop on Monday 25 September 2006

This workshop coincided with Professor Richard J. Herring's time as the Professorial Fellow in Monetary and Financial Economics at the Reserve Bank New Zealand and Victoria University of Wellington. Professor Herring is the Jacob Safra Professor of International Banking, at the Wharton School, University of Pennsylvania, Director of the Joseph H. Lauder Institute of Management and International Studies and Co-Director of the Wharton Financial Institutions Center.

The Workshop focussed on Financial Sector Balance Sheets and Vulnerability to Financial Crises, including areas such as:

  • mortgage lending and real estate impacts on bank balance sheets;
  • house prices, and urban or rural land prices;
  • Basel II issues and understanding balance sheet risk;
  • securitisation and the development of secondary markets in which financial institutions can offset risk;
  • financial sector stress testing;
  • behavioural aspects of default;
  • implication for balance sheets and risk of sectoral concentration in bank lending.

Workshop Programme

Monday 25 September 2006, Westpac Stadium, Wellington

Chaired by Adrian Orr, Deputy Governor, (RBNZ)

9:30am

Arrival and coffee

9:20

Welcome by Alan Bollard, Governor, Reserve Bank of New Zealand

Session One


9:30

Richard J. Herring (University of Pennsylvania)


"Property Prices, Lending and Vulnerability to Financial Crises" (PDF 480KB)

10:10

Discussant – Phil Lowe (Reserve Bank of Australia)


"Comments on Property Prices, Lending and Vulnerability to Financial Crises" (PDF 37KB)

10:20

General discussion

10:40

Coffee break

Session Two


11:00

Paul Kupiec (Federal Deposit Insurance Corporation)

"Basel II, Housing and Financial Stability" (PDF 567KB)

"Financial Stability and Basel II" (PDF 190KB)

"Basel II: A Case for Recalibration" (PDF 153KB)

11:30

John Quigley (University of California, Berkeley)

"Borrower Behaviour, Mortgage Terminations and the Price of Residential Mortgages" (PDF 426KB)

"Mortgage Terminations, Heterogeneity and the Exercise of Mortgage Options", Econometrica, Vol 68, No. 2 (March, 2000), 275 – 307

12:00

Discussant – James Twaddle (RBNZ)

12:10

Discussant – Les Oxley (University of Canterbury)

"Comments on ‘Borrower Behaviour, Mortgage Terminations and the Price of Residential Mortgages'" (PDF 160KB)

12:20

General discussion

12:30

Lunch

Session Three


2:00

Kurt Hess (University of Waikato)

"Credit Loss Experience of Australasian Banks – Methodological Aspects" (PDF 380KB)

"A Typology of Credit Loss and Provisioning Reporting by Banking Institutions in Australia" (PDF 342KB)

2:30

Ian Harrison and Tim Hampton (RBNZ)

"A Structured Approach to Stress Testing Residential Mortgage Portfolios" (PDF 62KB)

Paper – "A Structured Approach to Stress Testing Residential Mortgage Portfolios" (PDF 126KB)

3:00

Discussant – Susan Schroeder (Auckland University of Technology)

"Comments on Hess's Methodological Aspects of Credit Loss" (PDF 74KB)

3:10

Discussant – Peter Hall (ASB Bank)

3:20

General discussion

3:30

Coffee break

Roundtable Session


3:50

Observations and key issues

Richard J. Herring

4:00

Panel discussion

Richard J. Herring, Adrian Orr, Paul Kupiec, John Quigley

4:30

General discussion and close