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Macer Gifford will present听a paper giving a practioner鈥檚 insight into the role of liquidity in the pricing of loans and in the overall stability of the financial sector. He focuses on the pending liquidity regulation and provocatively asks听if it is听useful at all.听Does the regulation reduce the听reduce the risk of 鈥渋t鈥� ever happening again, or听does it simply move the risk elsewhere whilst increasing financial frictions听and so retarding growth?

Macer鈥檚 paper is organised in four parts. (i) It sketches out a simple methodology for how banks should price long term loans. (ii) It finds that the existence of a liquidity premium in this methodology could create the incentive for an inherently unstable financial system. (iii) It argues that the regulatory response to this instability is confused; substantially increases the liquidity premium and significantly impacts economic growth. (iv) The paper concludes that the regulatory response is misconceived and proposes an alternative approach.

Macer Gifford is a Visiting Fellow in the听, a joint project between GEG and the听 Blavatnik School of Government. Macer is on sabbatical from Standard Chartered Bank.

Discussants:

Alan Morrison, Professor of Finance at Said Business School, Oxford

Lord Robert May, Professor of Zoology, Oxford, whose recent research includes work with the听Bank of England on 听鈥渟tability and complexity in ecosystems鈥�.

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