Mission
The FDIC established the Center for Financial Research to encourage and support innovative research on topics that are important to the FDIC’s role in promoting financial stability. The Center’s research will explore key developments affecting the banking industry, risk measurement and management methods, regulatory policy and related topics of interest to the FDIC and the larger financial community.

Activities
The Center will carry out its mission through an agenda of research, forums and conferences that will encourage a dialogue incorporating industry, academic, and public-sector perspectives.

The key function of the Center is to support high-quality original research. The Center aims to achieve this objective by sponsoring relevant research program lines and soliciting rigorous analysis of the issues within each program under the leadership of a program coordinator. The FDIC-CFR will provide financial support for researchers undertaking relevant projects in selected program areas. Completed papers will be distributed as Center Working Papers.

In addition to providing financial support, the Center will provide a forum for the exchange of ideas among regulators, academicians, and financial industry representatives.

The Center will sponsor an annual conference on selected aspects of the financial system. Presented papers will include both Center-supported work and related work by other researchers. The Center will organize research roundtables, workshops and discussion groups among academic, industry and regulatory economists on issues critical to sound policymaking. In these meetings, academics and industry representatives will serve as sounding-boards for developing and implementing regulatory policy, while regulatory and industry economists will help academics identify relevant research topics.

FDIC-CFR Research Programs
1. Deposit Insurance. This research program focuses on deposit insurance principles, practices and policies. Sample topics: deposit insurance pricing, measurement of fund exposure, insurance industry best practices, reinsurance, moral hazard and safety-net protections, too-big-to-fail, least–cost resolution, firewalls within financial conglomerates.

2. Risk Measurement. State-of-the-art risk metrics and analysis contribute to sound financial management for the FDIC as well as insured institutions. Sample topics: market risk measurement, firms’ internal risk measurement models, credit-risk scoring, stress-testing, loan pricing, credit derivatives, impact of supervisory restrictions, risk monitoring tools and systems.

3. Bank Performance and the Economy. Banking’s role in and linkages to the larger economy and financial system are explored in this research program. Sample topics: the role of banks in the transmission of monetary policy, banks as liquidity providers, the role of underwriting standards in credit cycles, the impact of bank capital requirements on credit allocation, the effect of local and national economic conditions on bank performance, determinants of banks’ share of financial services markets, banks as delegated monitors.

4. Corporate Finance and Risk Management. This research program contributes to the continuing enhancement of best practices in an environment of rapid financial evolution. Sample topics: how corporations can, should and do fund themselves, capital budgeting, the cost of capital, loan and securities pricing, securitization, financial engineering and innovation, the role of managerial incentives in financing decisions, ownership structures, corporate governance. Risk management papers in this research line differ from those in the “Risk Measurement” track by their specific application to corporate settings, as opposed to general methodological contributions.

5. Policy and Regulation. This research program focuses on the elements of sound policymaking and effective regulation with minimal distortions and unintended consequences. Sample topics: the supervision and regulation of insured depository institutions, the financial safety net and government policy toward troubled financial institutions, the impact of deregulation on financial industry performance, corporate governance at financial institutions, government’s optimal role in securities markets, antitrust and competition policy in financial services, financial regulation motivated by social and/or political goals, reform of the current financial regulatory agency structure.