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This entry pertains to the European Summer Symposium in Financial Markets (ESSFM) 2026 — Banking and Corporate Finance. The conference was held at the Study Center Gerzensee, a scenic Swiss village near Bern.

Introduction

This was my second year at Gerzensee and my first on the banking and corporate finance side, after last year's asset pricing meeting. The symposium was organized by Zhiguo He.

I experienced the misfortune of my laptop breaking down on Tuesday, so I had to prepare my night time presentation on my iPad. But it was also a cherished opportunity to write the manuscript of my drafts by hand (which apparently is good for your brain) and explore outside the area a bit more this time via biking and hiking.

Paper Sessions

Here is a summary of the sessions I attended (which is pretty much every session except for half of Monday morning where I arrived a bit late):

Monday: New Issues in (Old) Corporate Finance and Banks

• Yuri Tserlukevich presented "Corporate Hedging, Contract Rights, and Basis Risk" (with Ilona Babenko). The paper points out that standard hedging theory treats a derivative as protection the firm holds to maturity, but in practice OTC derivatives sit under ISDA Master Agreements whose eight standard events of default allow the counterparty to close out the position early. In other words, the hedge can be pulled away exactly when it is most needed and this can also explain the puzzle that distressed firms appear to hold low hedge ratios.
• Erica Jiang presented "Real Origins of Financial Structure: The Role of Household and Firm Heterogeneity" (with Greg Buchak), which asks whether household and firm composition can explain why financial systems differ across countries and over time. The punchline of the paper is that demographic differences explain the savings side but not the borrowing side. There were some discussions about who owns the firms in the model and whether households wealth includes them and what actually generates the heterogeneity if you are only imposing different wealth levels. Of course, the larger looming question is how much additional $R^2$ this buys us on top of the usual suspects of regulation, technology, and institutions.

Tuesday: Bank and Nonbank

• Amit Seru delivered a nice opening session on the symbosis of banks and nonbanks.

  

  The textbook view is bank-centric where savers hold the resources but cannot find the users, so the banks can step in to intermediate. He showed that the bank balance-sheet share of U.S. lending fell from 55% to 33% over about 50 years, but even adding private credit moves the bank share only minimally. All of this was to say that private credit is definitely real and interesting, but the secular shift out of bank balance sheets is much older than that.

• Dominik Supera, my colleague at Columbia, presented "Bank to Non-Bank Lending and the Reallocation of Credit" (with Jian Li, Yiming Ma, and Caterina Mendicino). The authors document that there has been a rapid growth of euro-area bank lending to NBFIs since 2019, and that this happened mostly through reverse repos (which fund government-bond collateral) hence “crowding out” firm lending. Ben Hebert made a fair point that while the compositional evidence is convincing, the aggregate crowding out claim needs a GE assumption that was never made explicit (i.e. the pool of savings intermediated by banks). Ricardian equivalence probably doesn’t hold in practice, but still it would be nice to have the logic be airtight.

• David Xu presented "Credit Commitments by Nonbanks" (with Jing Huang), which hand-collects facility-level data on BDC commitment books and shows that BDCs now issue credit commitments at commitment-to-asset ratios comparable to banks. Interestingly, they manage the resulting liquidity risk not with cash but with their own undrawn bank credit lines, so liquidity insurance runs in two layers along the credit chain. My question was whether this is really about BDCs or just about any firm-facing nonbank writing commitments without a public backstop.