Imperial College London

Oren Schneorson, Ph.D.

Business School

Research Postgraduate
 
 
 
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Contact

 

o.schneorson15 Website CV

 
 
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Location

 

CABG454Business School BuildingSouth Kensington Campus

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Summary

 

Summary

I'm an Assistant Professor at Leibniz Institute for Financial Research, Frankfurt. I hold an MPhil in Economics (2015) from Oxford University and a PhD in Finance (2021) from Imperial College London where I was supervised by Professors Franklin Allen and David Miles. My research interests are in corporate finance, financial intermediation, systemic risk and macroeconomics.

Job Market paper


Interbank Credit Exposures and Financial Stability

In many countries, financial institutions receive preferential treatment in bankruptcy. More specifically, interbank liabilities are given seniority over general claims, a policy designed to prevent cascading losses in the financial system. This paper investigates how seniority of interbank liabilities affect financial stability. I develop a model that features a trade-off between protecting banks versus short-term creditors. The model identifies a new channel by which preferential treatment in bankruptcy can increase the probability of a bank-run - through reduced risk sharing. This channel has been ignored by previous studies, which focus only on the benefit of reducing domino-effect contagion. In order to evaluate the relative importance of these two channels, I calibrate my model to the U.S. banking system between 1997-2007 and quantify the conditions under which the domino-effect dominates risk sharing. I find that large bankruptcy costs are required for the domino-effect to dominate the risk-sharing benefits of interbank credit exposures.