Adi Mordel is a Principal Economist in the Financial Stability Department at the Bank of Canada. His current research centers on the link between financial distress and the real economy, with a particular interest on household lending and consumption. Other research focuses on the effects of public guarantees and incentive alignment in shadow banking activities. Adi Mordel received his PhD in Finance from Drexel University.
Deposit insurance protects depositors from failing banks, thus making insured deposits risk-free. When a deposit insurance limit is increased, some deposits that previously were uninsured become insured, thereby increasing the share of risk-free assets in households’ portfolios. This increase cannot simply be undone by households, because to invest in uninsured deposits, a household must first invest in insured deposits up to the limit. This basic insight is the starting point of the analysis in this paper.
Prudential liquidity requirements are a relatively recent regulatory tool on the international front, introduced as part of the Basel III accord in the form of a liquidity coverage ratio (LCR) and a net stable funding ratio (NSFR). I first discuss the rationale for regulating bank liquidity by highlighting the market failures that it addresses while reviewing key theoretical contributions to the literature on the motivation for prudential liquidity regulation.
Following changes to housing finance policies that target insured mortgages, uninsured mortgage credit has been growing. This robust growth creates a larger pool of mortgages that may be suitable for private-label residential mortgage-backed securities (RMBS).
Residential mortgage securitization plays an important role in the Canadian system of housing finance, especially given the rising share of government-supported (i.e., public) securitization over the past 15 years. Mordel and Stephens analyze the evolution of two types of mortgage securitization in Canada— private and public — focusing in particular on the underlying public policy and economic benefits of the latter. They review the potential implications of the extent of public securitization and conclude with a discussion of policies that could be considered to reinvigorate private securitization in Canada.
" Banks' Funding Stress, Lending Supply and Consumption Expenditure" (with Evren Damar and Reint Gropp). Journal of Money, Credit and Banking. forthcoming
“Asset Sales, Recourse, and Investor Reactions to Initial Securitizations: Evidence why Off-balance Sheet Accounting Treatment does not Remove On-balance Sheet Financial Risk” ((with Eric Higgins and Joseph Mason). Journal of Risk Finance. forthcoming
"International Banking and Cross-Border Effects of Regulation: Lessons from Canada" (with Evren Damar). March 2017. International Journal of Central Banking, vol. 13(2), pages 35-64.
"The Ex Ante versus Ex Post Effect of Public Guarantees" (with Evren Damar and Reint Gropp), 2013. in: The Role of Central Banks in Financial Stability: How Has It Changed? Chapter 18, pages 347-364. World Scientific Publishing Co. Pte. Ltd.