We study the Green and Lin (2003) model of financial intermediation with two new features: traders may face a cost of contacting the intermediary, and consumption needs may be correlated across traders. We show that each feature is capable of generating an equilibrium in which some (but not all)...

Abstract: The financial crisis has been attributed partly to perverse incentives for traders at banks and has led policy makers to propose regulation of banks’ remuneration packages. We explain why poor incentives for traders cannot be fully resolved by only regulating the bank’s top...

Abstract: The financial crisis has been attributed partly to perverse incentives for traders at banks and has led policy makers to propose regulation of banks’ remuneration packages. We explain why poor incentives for traders cannot be fully resolved by only regulating the bank’s top...

Recent econometric evidence has noticeably changed views on the desirability and the appropriate design of explicit Deposit Insurance Schemes (DIS). The purpose of this paper is to take a second look at the data. After surveying recent empirical work and providing a theoretical framework, we...

We study the effects of bank transparency on both banks' asset and liquidity risks, and ultimately, on banking sector stability and welfare. We show how enhanced bank transparency increases banks' vulnerability to excessive deposit outflows, but this threat of a liquidity crisis incentivizes...

Last year, at around the same time, two reforms of deposit insurance systems were announced - one in the United States and the other in the European Union. The American proposal of the reform was triggered by the banking crisis of March 2023 (bank runs and failures) and it was put forward by the...

As part of the completion of the European Banking Union, the decision on the organization of institutional and deposit protection is still pending. The mere linking of these two objectives, which are by no means necessarily identical in terms of content, has recently led to heated controversy....

This paper tests whether an increase in insured deposits causes banks to become more risky. We use variation introduced by the U.S. Emergency Economic Stabilization Act in October 2008, which increased the deposit insurance coverage from $100,000 to $250,000 per depositor and bank. For some...