A Rear-mirror View to the 11th FIN-FIRE “Challenges to Financial Stability” Workshop
On September 25th, financial economists from all over the world travelled for the 11th time to Halle (Saale) to attend the annual FIN-FIRE Workshop at IWH. During two days, authors of ten papers covered a comprehensive overview of contemporary issues that pose potential challenges to the financial system, including data privacy in mortgage markets, climate risks in bond markets, synthetic risk transfers, the effects of geopolitical risks for lending, as well as granular perspectives on the transmission of monetary policy. An intense exchange of thoughts between authors, discussants, and the audience yielded genuinely new insights into the resilience and fragility of financial systems.
07. January 2026
https://doi.org/10.18717/ww0jtx-fr12
Contents
Page 1
Keynote by Itay GoldsteinPage 2
synthetic risk transfers, racial disparities in the mortgage market All on one pageA particular highlight of the conference included the keynote presentation by Itay Goldstein, professor at the Wharton School of the University of Pennsylvania, director of the American and the Western Finance Association, and a renowned expert on the nature of banking panics. Professor Goldstein presented on how strategic complementarities could potentially undermine the fragility of the financial system, a topic that was recognized by the Nobel Memorial Prize in Economic Sciences of 2022 and which garnered renewed public attention during the United States banking crisis of 2023.
Banks engage in liquidity mismatches, which pose a risk to the financial sector if the banks underperform. This is because it incentivises depositors to withdraw their money, which could cause the banks to collapse. The effect can be amplified through strategic complementarities. For instance, investors' propensity to act, or withdraw funds, increases significantly if they expect other investors to do the same.
Goldstein provided evidence that a higher degree of liquidity transformation makes banks more sensitive to uninsured deposit outflows when they perform poorly. Therefore, deposit outflows do not only depend on fundamental values but also can be amplified through depositors' panic that can be caused by banks' liquidity structures. Strategic complementarities are not only affecting banks, as they also pose a threat to mutual funds. This raises the question of whether current regulatory measures are effective and how they can be improved to reduce strategic complementarities and bank runs.
