incentives to take risk and raise failure probabilities. The competition-stability trade-off is characterized and the … implications of the analysis for regulation and competition policy are derived. It is found that optimal regulation may depend on …

bank market values hardly respond to changes in the default risk of individual systemic banks. Together, however, changes … the default risk of banks designated as globally systemically important by the Financial Stability Board. We find that … in systemic banks’ default risk explain a substantial part of changes in other banks’ market values. This result is …

This paper seeks to understand the interplay between banks, bank regulation, sovereign default risk and central bank … cheaply, effectively shifting the risk of some of the potential sovereign default losses on the common central bank. … guarantees in a monetary union. I assume that banks can use sovereign bonds for repurchase agreements with a common central bank …

these costs. Bank levies attempt to internalize systemic risk and increase the costs of leverage. This paper evaluates the …Bank distress can have severe negative consequences for the stability of the financial system, the real economy, and … public finances. Regimes for restructuring and restoring banks financed by bank levies and fiscal backstops seek to reduce …

. There are two main results: First, if all banks have enough liquidity so that they can honor their short-term obligations, a … financial transactions tax is entirely neutral. Second, in a model with correlated investment risk and short-term financing of …

This paper analyzes the effect of the removal of government guarantees on bank risk taking. We exploit the removal of …

Most theoretical central bank models use short horizons and focus on a single tradeoff. However, in reality central … bankruptcy. We term these factors discipline and stability effects, respectively. The central bank’s welfare decreases with …

about bank asset risk. The regulator can either (1) make bank capital requirements contingent on credit ratings; or (2) set … constrain high risk bank investment without simultaneously reducing overall investment volume. However, if collusion between the … rating agency and the bank corrupts rating quality, rating-independent regulation enhances welfare. The welfare benefits are …