In recent years, market discipline has attracted interest as a mechanism to augment or replace government regulation of the financial sector and, especially, depository institutions. The ability to substitute market discipline for bank regulation is of much interest and we use a theoretical...

The focus of this paper is on the interaction between a bail-out loan decision of a bank to a sovereign borrower and the adequacy of the bank's capital. The new loan is granted on two conditions: First, it must improve the likelihood of repayment of the outstanding loan; second the bank should...

The new Basel II Accord (2006), established new and revised capital requirements for banks. In this paper we analyze and estimate the possible effects of the new rules on the pricing of bank loans. We relate to the two approaches for capital requirements (internal and standardized) and...