Granular Monetary Policy Surprises
How bank-specific monetary-policy surprises lead to heterogeneous loan repricing for small firms and proprietary trading losses for banks.
2026Working paper
Banking · Liquidity · Monetary policy · Financial stability
Falko Fecht — Research and publications
I lead the Research Centre at the Deutsche Bundesbank and teach financial economics at Frankfurt School. My research combines institutional detail with empirical and theoretical analysis of banking, market-based finance, and monetary policy. I study how shocks are transmitted through banks, investment funds, and money markets; how liquidity risk and institutional frictions shape monetary-policy transmission, credit supply, and financial stability; and how policy and regulation can strengthen the resilience of the financial system.
News
Seminar presentation at IE Business School
Presentation at the European Fund and Asset Management Association with Moritz Kellers on Monetary Policy, Fragility, and Fund Flows
New working paper with Björn Imbierowicz and Moritz Kellers: Granular Monetary Policy Surprises
New working paper with Björn Imbierowicz: Nonbanks, Deposit Franchises, and Monetary Policy Transmission
Current research
Working papers & ongoing projects
Paper pages and related material are linked directly below each project.
2026Working paper
Nonbanks, Deposit Franchises, and Monetary Policy Transmission
How funding structures and deposit franchises—not depository status alone—shape monetary-policy pass-through to U.S. mortgage borrowers.
2026Discussion paper
Monetary Policy, Fragility, and Fund Flows
How the fragility of open-end investment funds shapes the transmission of monetary-policy shocks to funds, markets, and banks.
2026Working paper
2024Discussion paper
Financial Fragility in Open-ended Mutual Funds
Evidence on how price-based liquidity-management tools can make vulnerable funds more resilient in market stress.
2023ECB working paper
Liquidity Support and Distress Resilience in Bank-affiliated Mutual Funds
How affiliation with a banking group can provide liquidity support to funds facing large redemptions.
2021Working paper
Banks’ Equity Stakes in Firms: A Blessing or Curse in Credit Markets?
Evidence that banks’ equity stakes in borrowers can sustain crisis lending to riskier firms, but also foster defaults and zombie lending.
2021Project
Managerial Overconfidence and Access to Funding
How banks’ loan rejections can discipline overconfident SME managers and prevent value-destroying investment.
2019Discussion paper
The Fire-Sale Channels of Universal Banks in the European Sovereign Debt Crisis
How universal banks sold risky sovereign bonds to affiliated funds and retail customers during the euro-area crisis, shifting losses within financial groups.
2018Working paper
Are Some Banks Structurally Prone to Borrow from the Euro Area’s Overnight Lender-of-the-Last-Resort Facility?
How banks with structurally riskier liquidity management are more likely to rely on the Eurosystem’s overnight lender-of-the-last-resort facility.
2016Working paper
Collateral, Central Bank Repos, and Systemic Arbitrage
How weaker banks use lower-quality collateral to obtain disproportionately more central-bank liquidity, shifting risk to the Eurosystem.
Peer-reviewed research
Publications
Journal articles in reverse chronological order.
Liquidity Support in Financial Institutions
with Egemen Genc, Yigitcan Karabulut, and Patrick Weber · Management Science
How banks channel client inflows to stabilize affiliated mutual funds under redemption pressure without imposing systematic costs on clients.
Strategic Communication Among Banks
with Christian Bittner, Melissa Pala, and Farzad Saidi · Journal of Financial Economics, vol. 184
How syndicated-loan networks transmit private takeover information between banks, shaping pre-announcement trading and acquisition prices.
Contagious Zombies
with Christian Bittner and Co-Pierre Georg · Journal of Financial Stability, vol. 84
How weak banks used long-term ECB funding to evergreen loans to zombie firms, spreading risk to suppliers through trade credit.
A Theory of the Boundaries of Banks with Implications for Financial Integration and Regulation
with Roman Inderst and Sebastian Pfeil · Financial Management, vol. 55(2)
A theory of when banks integrate through mergers or interbank lending, balancing allocation gains against risk-shifting incentives.
A Dealer’s Funding Liquidity Risk and Its Money Market Trades in the 2007/08 Crisis
with Stefan Reitz and Patrick Weber · Journal of Financial Stability, vol. 75
Evidence that a dealer’s own funding risk raised interbank liquidity prices—especially sharply after Lehman—and deepened the market contraction.
Who Borrows from the Eurosystem’s Lender-of-the-Last-Resort Facility?
with Patrick Weber · Journal of Banking & Finance, vol. 150
Evidence that larger banks with thinner liquidity buffers and greater idiosyncratic liquidity risk rely more on the Eurosystem’s marginal lending facility.
Cross-Border Interbank Liquidity, Crises, and Monetary Policy
with Puriya Abbassi, Falk Bräuning, and José-Luis Peydró · Journal of International Economics, vol. 139
How global and sovereign-debt crises curtailed cross-border interbank liquidity, while nonstandard monetary policy improved access without fully reversing fragmentation.
Private Value of Central Bank Liquidity and Banks’ Bidding Behavior in Variable Rate Tender Auctions
with Patrick Weber · Journal of Banking & Finance, vol. 136
How banks’ bids in ECB refinancing auctions reveal their private value of liquidity and predict later recourse to the marginal lending facility.
Fear, Deposit Insurance Schemes, and Deposit Reallocation in the German Banking System
with Stefan Thum and Patrick Weber · Journal of Banking & Finance, vol. 105
How depositor fear shifted funds toward publicly guaranteed German banks, and how blanket guarantees halted that destabilizing reallocation.
Dealer Behaviour in the Euro Money Market During Times of Crisis
with Stefan Reitz · Applied Economics, vol. 50(48)
How crisis-era counterparty risk and uncertainty weakened a major money-market dealer’s use of order flow to price liquidity.
Is Proprietary Trading Detrimental to Retail Investors?
with Andreas Hackethal and Yigitcan Karabulut · Journal of Finance, vol. 73(3)
Evidence that universal banks sold proprietary positions to retail clients, with subsequent underperformance and lower client portfolio returns.
Variations in Market Liquidity and the Intraday Interest Rate
with Puriya Abbassi and Johannes Tischer · Journal of Money, Credit and Banking, vol. 49(4)
Evidence that stressed money markets generate a positive morning liquidity premium that accommodative central-bank provision reduces but does not eliminate.
Relationship Lending in the Interbank Market and the Price of Liquidity
with Falk Bräuning · Review of Finance, vol. 21(1)
How established interbank relationships improve liquidity access and lower borrowing costs, especially for opaque banks during a crisis.
The Role of Interbank Relationships and Liquidity Needs
with Ben Craig and Günseli Tümer-Alkan · Journal of Banking & Finance, vol. 53
How diversified interbank borrowing lowers banks’ liquidity costs, while central lenders bid more aggressively in ECB refinancing operations.
The Dark and the Bright Side of Liquidity Risks: Evidence from Open-end Real Estate Funds in Germany
with Michael Wedow · Journal of Financial Intermediation, vol. 23(3)
Evidence that fundamentals and panic jointly drove runs on German open-end real estate funds, with liquidity buffers and investor segmentation offering resilience.
Financial Integration, Specialization, and Systemic Risk
with Hans Peter Grüner and Philipp Hartmann · Journal of International Economics, vol. 88
How financial integration enables bank specialization and welfare gains while increasing cross-border contagion and systemic-crisis risk.
The Price of Liquidity: The Effects of Market Conditions and Bank Characteristics
with Kjell G. Nyborg and Jörg Rocholl · Journal of Financial Economics, vol. 102(2)
How liquidity imbalances, bank size, financial health, and guarantees shape the price banks pay for central-bank liquidity.
The Marketability of Bank Assets, Managerial Rents and Banking Stability
with Wolf Wagner · Journal of Financial Stability, vol. 5(3)
Why greater asset tradability can strengthen banks’ funding structures yet weaken monitoring incentives and leave overall stability ambiguous.
Banks, Markets, and Efficiency
with Antoine Martin · Annals of Finance, vol. 5(2)
How household market access trades off bank competition against liquidity insurance, with different welfare implications across bank- and market-based systems.
Financial Intermediaries, Markets, and Growth
with Kevin Huang and Antoine Martin · Journal of Money, Credit and Banking, vol. 40(4)
A model showing how markets constrain banks’ liquidity insurance and can support growth by shifting investment toward productive assets.
Liquidity Management and Overnight Rate Calendar Effects: Evidence from German Banks
with Kjell G. Nyborg and Jörg Rocholl · North American Journal of Economics and Finance, vol. 19(1)
How German banks—especially Landesbanken—adjust reserve holdings to predictable EONIA patterns and back-load reserve fulfilment.
Limits to International Banking Consolidation
with Hans Peter Grüner · Open Economies Review, vol. 19(5)
Why regional liquidity shocks and contagion risks create a natural limit to cross-border banking consolidation even without regulatory barriers.
Open-End Real Estate Funds in Germany: Genesis and Crisis
with Christina Bannier and Marcel Tyrell · Kredit und Kapital, vol. 41(1)
How the institutional design of German open-end real estate funds contributed to crisis vulnerability and what theory implies for regulation.
The Eurosystem Money Market Auctions: A Banking Perspective
with Ben Craig · Journal of Banking & Finance, vol. 31(9)
How banks’ liquidity needs and risk attitudes are reflected in their bidding behavior in ECB money-market auctions.
On the Stability of Different Financial Systems
Journal of the European Economic Association, vol. 2(6)
Why moderately bank-dominated financial systems can be especially fragile when bank asset fire sales depress prices and trigger wider distress.
Policy and broader writing
Other publications and policy pieces
Policy briefs, book chapters, practitioner articles, and selected commentary.
Geopolitics as a Monetary Shock: The “Silent Tightening” in the European Banking System
with Stefan Greppmair and Björn Imbierowicz · VoxEU, 24 January 2026
Transmission of Liquidity Shocks through Non-Bank Financial Intermediaries: Evidence from the International Banking Research Network
with Linda S. Goldberg · VoxEU, 5 August 2025
Information Transmission between Banks and the Market for Corporate Control
with Christian Bittner, Melissa Pala, and Farzad Saidi · SUERF Policy Brief, no. 424
Contagious Zombies
with Christian Bittner and Co-Pierre Georg · SUERF Policy Brief, no. 178
What We Can Learn from the Introduction of Blanket Deposit Guarantees in Germany 2008 about the Benefits of EDIS
with Patrick Weber · ifo DICE Report, vol. 17(1), pp. 26–29
Optimal Lender of Last Resort Policy in Different Financial Systems
with Marcel Tyrell · in Monetary Policy, Financial Crises, and the Macroeconomy, Springer, pp. 27–57
Eurozone Interbank Lending Market during the Global and EZ Crises
with José-Luis Peydró, Falk Bräuning, and Puriya Abbassi · VoxEU, 2 April 2015
Fatale „Schwarze Null“
with Adalbert Winkler · Handelsblatt, 12 January 2015
Der unbesicherte Geldmarkt – Blinddarm des Finanzsystems?
Zeitschrift für das gesamte Kreditwesen, vol. 66(7), pp. 338–343
Banken: Ein Nachruf
in A. Schnieder and T. Sommerlatte (eds.), Die Zukunft der deutschen Wirtschaft – Visionen für 2030, Publicis, pp. 180–185
Bad Bank: ein alternativer Vorschlag
with Hans Peter Grüner · ifo Schnelldienst, vol. 62(13), pp. 3–7
Current State of Financial Globalization
with Hans Peter Grüner and Philipp Hartmann · in D. Evanoff and G. Kaufman (eds.), Globalization and Systemic Risk, World Scientific
Book Review: Globalization of Capital Markets and Monetary Policy
edited by Jens Hölscher and Horst Tomann · Journal of Economics, vol. 90(1), pp. 109–111
Is Competition in the Financial Sector a Good Thing?
with Antoine Martin · Journal of Financial Transformation, vol. 17, pp. 123–129
Financial Integration through the Interbank Market – Stability and Welfare Implications
with Hans Peter Grüner · in K. Liebscher, J. Christl, P. Mooslechner, and D. Ritzberger-Grünwald (eds.), Financial Development, Integration and Stability, Edward Elgar
The Institutional Design of Central Banks
with Gerhard Illing · in A. Mullineux and V. Murinde (eds.), Handbook of International Banking, Edward Elgar
Profile
Short Bio
Falko Fecht is Head of Research at the Deutsche Bundesbank and Visiting Professor of Finance at Frankfurt School of Finance & Management. Before taking up his current position at the Bundesbank, he was Professor of Financial Economics at Frankfurt School for ten years and held the DZ BANK Endowed Chair of Financial Economics. During this time, he also served as a Bundesbank Research Professor.
He studied economics and earned his doctorate at Goethe University Frankfurt. Before entering academia, he worked as an economist in the Economics Department and Research Centre of the Deutsche Bundesbank. He has been a visiting scholar at the Federal Reserve Banks of New York, Cleveland, and Kansas City, De Nederlandsche Bank, and the European Central Bank.
His research focuses on financial intermediation, liquidity, monetary-policy transmission, and financial stability. His work has appeared in leading journals including the Journal of Finance, the Journal of Financial Economics, the Review of Finance, the Journal of the European Economic Association, the Journal of International Economics, and Management Science.
Contact
Research, policy, and academic exchange
falko.fecht@bundesbank.de
Deutsche Bundesbank
Wilhelm-Epstein-Straße 14
60431 Frankfurt am Main · Germany