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Persistent link: https://www.econbiz.de/10001787394
The regulatory use of banks' internal models makes capital requirements more risk-sensitive but invites regulatory arbitrage. I develop a framework to study bank regulation with strategic selection of risk models. A bank supervisor can discourage arbitrage by auditing risk models, and implements...
Persistent link: https://www.econbiz.de/10011958937
regulation influences this decision. This paper attempts to give an overview of the literature in order to see what theory …
Persistent link: https://www.econbiz.de/10011474803
Persistent link: https://www.econbiz.de/10008668342
The recent crisis was characterized by massive illiquidity. This paper reviews what we know and don't know about illiquidity and all its friends: market freezes, fire sales, contagion, and ultimately insolvencies and bailouts. It first explains why liquidity cannot easily be apprehended through...
Persistent link: https://www.econbiz.de/10008732226
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around the world to ensure global competitiveness of banks. Using an agent-based model of the financial system, we find that …
Persistent link: https://www.econbiz.de/10009554222
Limited liability and asymmetric information between an investment bank and its lenders provide an incentive for a bank to undercapitalise and finance overly risky business projects. To counter this market failure, national governments have imposed solvency constraints on banks. However, these...
Persistent link: https://www.econbiz.de/10011400902
The lack of coordination in the resolution of multinational banks has led to demands for the increased centralization of resolution regimes. However, as this paper argues, the anticipation of resolution procedures affects the incentives of host countries to impose capital standards on their...
Persistent link: https://www.econbiz.de/10011547858
In this paper, we investigate how the introduction of complex, model-based capital regulation affected credit risk of financial institutions. Model-based regulation was meant to enhance the stability of the financial sector by making capital charges more sensitive to risk. Exploiting the...
Persistent link: https://www.econbiz.de/10010403970