Safe assets: A review

We survey the emerging literature on safe assets. The recent evidence on a time-varying safety premium suggests a demand for safety quite distinct from liquidity and classic money demand, offering insight on a strong segmentation between safe savings and speculative investment markets. A related theoretical literature studies the private creation of (quasi) safe assets by intermediaries, shedding new light on bank intermediation and financial stability. Novel concepts such as maturity races, information sensitivity, risk-intolerant debt and induced runs reinforce the liquidity risk externality associated with banking, and have significant implications for research on credit cycles as well as for prudential policy.