Banking

The course reviews the literature on financial intermediation and is relevant for students interested in finance, macroeconomics and governance. It combines a classic contractual approach with recent work on system‐wide risk creation. Drawing from the lesson of the crisis, it focuses on the risk transformation role of banks and shadow banks and the sources of endogenous credit cycles and instability. A key goal is to offer foundations for micro and macro prudential policy reform, drawing from models of opportunism, risk externalities or behavioral biases. Topics include debt optimality, moral hazard in risk choices, financial externalities, maturity and liquidity risk transformation, endogenous risk, induced runs, demand for safety, and their implications for capital and liquidity regulation.