Cliff Rossi, Tyser Teaching Fellow and Executive-in-Residence at the University of Maryland's Robert H. Smith School of Business, is among about 25 finance experts from around the world selected to share ideas in an April 9-10, 2012, conference, "Financial Reform: the Devil is in the Details," hosted by the Federal Reserve in Atlanta.
Rossi is on a panel to discuss the role of regulated intermediaries in providing maturity transformation. Other panels/presentations will cover the future role of the government in mortgage finance, the potential for the new regulations to create a new shadow banking system and the creation of systemically responsible money market funds.
In describing significance of its event, the Federal Reserve stated: "A set of urgent financial policy issues, such as sovereign risk and over-the-counter derivatives, has relegated a host of other major policy issues to the level of mere “details” that can be more thoroughly addressed later. Yet the ultimate resolution of these details may be profoundly influenced by decisions being made now."
The title of Rossi's panel discussion poses the question "Is Maturity Transformation the Devil's Work?" The panel will review the dilemma faced by banks in attempting to address requirements seemingly at odds with one another.
“The topic covers tradeoffs in two critical aspects of bank asset-liability management: ensuring sufficient liquidity exists at financial institutions to avoid bank panics as during the financial crisis, and matching the duration of assets and liabilities of these firms to manage interest rate risk,” Rossi said. “A number of recent regulatory reforms are aimed at shortening the length of bank funding types in order to ensure sufficient liquidity during a crisis. At the same time, prudent risk management practices require these firms to lengthen their liabilities to better match their asset maturities.”
Other financial experts speaking at the conference include Federal Reserve Chairman Ben Bernanke, Sheila Bair from Pew Charitable Trusts, Paul McCulley from the Global Interdependence Center and notables from the Federal Deposit Insurance Corporation, Bank of England and others.
In early December, Rossi and Smith colleague Dilip B. Madan, professor of finance, were among experts selected by U.S. Treasury officials to speak at a conference on financial reform. Rossi coauthored a working paper from the event.