This paper proposes a positive theory of the links between banks' capitalisation and their liquidity risk taking, the … extent of fire-sale problems, and the severity of liquidity crises. In a basic framework with a single bank, we find that … banks' incentives to hold liquidity for precautionary reasons are increasing with their capital. In a continuum …

Making use of a structural model that allows for optimal liquidity management, we study the role that repos play in a … depositor preference rule. We also analyze the impact of a liquidity coverage ratio, payout restrictions and a leverage ratio on …

We develop a dynamic model of banking to assess the effects of liquidity and leverage requirements on banks' insolvency … regulatory requirements. Our analytic characterization of the bank policy choices shows that imposing solely liquidity … requirements leads to lower bank losses in default at the cost of an increased likelihood of default. Combining liquidity …