Prof. Thomas Gehrig: Trading Promises - Can we Trust Banks?

Trading Promises – Can we Trust in Banks?

After centuries of experience with banking instability the fundamental question arises to what extent bank-runs are endemic to the financial sector? Are bank-runs and financial crises inevitable? Is there a role for prudential regulation and why does it regularly falter? If bank runs are manifestations of inefficiencies in social learning, why has the price tag to be so high?

The presentation provides a selective review of the current financial crisis introducing the basics of any banking crisis and highlighting some specifics of the current crisis. While there are many commonalities with prior bank-runs, a distinctive feature of the current crisis seems to be massive system-wide speculation against (implicit) government promises.