The banking sector in the United Kingdom (UK) was deeply affected by the crisis. Bank credit has collapsed reflecting both weak demand and tighter supply. New prudential requirements have improved the resilience of the banking sector and a number of measures were taken to support credit supply....

Credit Guarantee Schemes (CGSs) are a widely used policy tool to ease access to finance by SMEs, which, in some countries, ramped up in the aftermath of the 2008-09 financial crisis. The present study aims to improve understanding about the role, impact and sustainability of CGSs, by...

We estimate the effects of deregulation of U.S. banking restrictions on the amount of interstate personal income insurance during the period 1970--2001. Interstate income insurance occurs when personal income reacts less than one-to-one to state-specific shocks to output. We find that income...

We analyze shareholders' incentives to change the leverage of a firm that has already borrowed substantially. As a result of debt overhang, shareholders have incentives to resist reductions in leverage that make the remaining debt safer. This resistance is present even without any government...

The extreme fragility of the financial system that gives rise to systemic risk and crises is rooted in the incentives of people within this system and the failure of regulation to counter these incentives. The same forces that increase systemic risk also distort credit markets, exacerbate...

Capital regulation is critical to address distortions and externalities from intense conflicts of interest in banking and from the failure of markets to counter incentives for recklessness. The approaches to capital regulation in Basel III and related proposals are based on flawed analyses of...

The debate on banking regulation has been dominated by flawed and misleading claims. The title of our book The Bankers New Clothes: What's Wrong with Banking and What to Do about It (Princeton University Press, 2013, see bankersnewclothes.com) refers to flawed claims about banking and banking...

Firms' inability to commit to future funding choices has profound consequences for capital structure dynamics. With debt in place, shareholders pervasively resist leverage reductions no matter how much such reductions may enhance firm value. Shareholders would instead choose to increase leverage...

Excessive leverage (indebtedness) in banking endangers the public and distorts the economy. Yet current and proposed regulations only tweak previous regulations that failed to provide financial stability. This paper discusses the forces that have led to this situation, some of which appear to be...