for anyone who will be faced with managing a household budget, making financial investments, finding reliable information about buying a car or house, and preparing financially for retirement and other life goals. accordingly, in addition to ensuring that students graduate with the financial literacy skills they need to navigate in the modern financial world, we, as a society, must also make sure that adults have opportunities to gain these skills or to refresh what they have learned. many of you are, or will be, practitioners in the financial services industry – perhaps serving retail clients – and in that capacity i hope you will make the promotion of financial and economic education a part of your mission as rise is redefining investment strategy education. for more information, see www. udayton. edu / business / rise. see ben s. bernanke ( 2005 ), “ remarks by governor ben s. bernanke, ” speech delivered at the redefining investment strategy education symposium, dayton, ohio, march 30. see the federal reserve education website, www. federalreserveeducation. org. bis central bankers ’ speeches well. these skills not only help people provide a better life for themselves and their families, but, by deepening their understanding of the world economy, having such skills also helps equip them to be engaged citizens and informed voters. let me close by congratulating the university of dayton for its leadership in hosting the rise forum. i hope this innovative program, which i ’ m told is the world ’ s largest student investment conference, succeeds in its ambitious goal of bringing together the current and future leaders of finance to focus on creating a better economic future. bis central bankers ’ speeches

occur in the shadow - banking sector – notably, short - term collateralized claims such as broker - dealer repurchase agreements ( repos ) – bank deposits are noteworthy because, in the modern institutional environment, they are highly sticky and not prone to run at the first sign of trouble. in its simplest terms, our story is as follows : there are different private technologies for creating safe money - like claims. the “ banking ” technology involves meaningful amounts of capital as well as deposit insurance and thus leads to deposits that are both safe and relatively stable. the “ shadow banking ” technology uses less capital and manufactures safety by, instead, giving repo investors collateral and the right to seize the collateral on a moment ’ s notice. so shadow banking money is much more run prone than bank money. given its relatively stable nature, the banking model is better suited to investing in assets that are illiquid and subject to interim price volatility – that is, to fire - sale risk. these assets can be loans that involve significant amounts of monitoring, or they can be securities that require less monitoring. what is essential is the synergy between issuing stable types of money claims and investing in assets that have some degree of exposure to fire - sale risk. that synergy, in our view, is at the heart of the business of traditional banking. we have developed a simple theoretical model that captures the main ingredients of this story and makes some further testable predictions. it ’ s probably ill - advised over lunch, but i will take a crack at sketching this model for you here. however, let me start with three stylized facts to motivate the theory. stylized facts the first fact, and the one that i suspect will surprise you the least, is the strong homogeneity of the liability side of banks ’ balance sheets : banks are almost always and everywhere largely deposit financed. for example, in the cross section, and using year - end 2012 data, a bank at the 10th percentile of the distribution had a ratio of deposits to assets of 73. 6 percent, while a bank at the 90th percentile had a ratio of 88. 9 percent. 6 a similar homogeneity is apparent in the time series : over the past 115 years, deposits have averaged 80 percent of bank assets, with a standard deviation of only 8 percent. these patterns are in sharp contrast to those for nonfinancial firms, for which capital structure tends to be much less determinate, both