Toni Ahnert is a Research Advisor in the Financial Stability Department at the Bank of Canada. He is a financial economist with interests in financial intermediation, global games, and international finance. He received his Ph.D. in Economics from the London School of Economics and Political Science and is a Research Affiliate at CEPR (Financial Economics), a member of the Finance Theory Group, and a Research Associate at LSE's Systemic Risk Centre.
Staff Working Papers
Third parties often assume default risk at loan origination in return for a fee. Insurance, various guarantees and external credit enhancements protect the owner of the loan against borrower default. Governments often assume such default risk through guarantees for various types of loans, including mortgages, student loans and small business loans.
After the financial crisis of 2007–09, many jurisdictions introduced new banking regulations to make banks more resilient and less likely to fail. These regulations included tighter limits for the quality and quantity of bank capital and introduced minimum standards for liquidity. But what was the impact of these changes?
Can macroprudential foreign exchange (FX) regulations on banks reduce the financial and macroeconomic vulnerabilities created by borrowing in foreign currency? To evaluate the effectiveness and unintended consequences of macroprudential FX regulations, we develop a parsimonious model of bank and market lending in domestic and foreign currency and derive four predictions.
We present a simple model to study the risk sensitivity of capital regulation. A banker funds investment with uninsured deposits and costly capital, where capital resolves a moral hazard problem in the banker’s choice of risk.
The scale of safe assets suggests a structural demand for a safe wealth share beyond transaction and liquidity roles. We study how investors achieve a reference wealth level by combining self-insurance and contingent liquidation of investment. Intermediaries improve upon autarky, insuring investors with poor self-insurance and limiting liquidation.
We examine the effect of ex-post information contagion on the ex-ante level of systemic risk defined as the probability of joint bank default.
We model the asset-opacity choice of an intermediary subject to rollover risk in wholesale funding markets. Greater opacity means investors form more dispersed beliefs about an intermediary’s profitability.
In this piece we show that a limit on the level of asset encumbrance and minimum capital requirements are effective tools for minimizing the incentive for banks to take excessive risk.
We analyze how a wealth shift to emerging countries may lead to instability in developed countries. Investors exposed to expropriation risk are willing to pay a safety premium to invest in countries with good property rights.
We propose a novel theory of financial contagion. We study global coordination games of regime change in two regions with an initially uncertain correlation of regional fundamentals.
Financial System Review Article
June 7, 2018
The author traces developments in the Canadian covered bond market. Covered bonds could be a valuable way to provide a stable and diverse source of funding, particularly for smaller banks. However, higher issuance could increase banks’ vulnerability to liquidity stress, with implications for the broader financial system. The author argues that these benefits and challenges can be balanced in a well-designed policy framework.
- "Asset Encumbrance, Bank Funding and Fragility"
(with Kartik Anand, Prasanna Gai, James Chapman), Review of Financial Studies, 32 (6), June 2019, Pages 2422-55.
- "Information Contagion and Systemic Risk"
(with Co-Pierre Georg), Journal of Financial Stability, 35, April 2018, Pages 159-71.
- "Information Choice and Amplification of Financial Crises"
(with Ali Kakhbod), Review of Financial Studies, 30 (6), June 2017, Pages 2130-78.
- "Rollover Risk, Liquidity and Macroprudential Regulation"
Journal of Money, Credit and Banking, 48 (8), December 2016, Pages 1753-85.
- "Macroprudential FX Regulations: Shifting the Snowbanks of FX Vulnerability?"
(with Kristin Forbes, Christian Friedrich and Dennis Reinhardt), Journal of Financial Economics, accepted.
- "Should bank capital regulation be risk sensitive?"
(with James Chapman and Carolyn Wilkins), Journal of Financial Intermediation, accepted.