Today’s regulatory rules, especially the easily-manipulated measures of regulatory capital, have led to costly bank … failures. We design a robust regulatory system such that (i) bank losses are credibly borne by the private sector (ii …) systemically important institutions cannot collapse suddenly; (iii) bank investment is counter-cyclical; and (iv) regulatory …

banks. When bank default risk becomes significant, retail deposit insurance creates an asymmetry between banks that operate …

guarantees, and provision of unrestricted liquidity support. In the context of a simple model of information-based bank runs … any of these policies leads to a reduction in the interest rate of uninsured deposits and in the bank’s incentives to take …

This paper studies the strategic interaction between a bank whose deposits are randomly withdrawn, and a lender of last … resort (LLR) that bases its decision on supervisory information on the quality of the bank’s assets. The bank is subject to a …. Moreover, when the LLR does not charge penalty rates, the bank chooses the same level of risk and a smaller liquidity buffer …

exhibits both adverse selection and moral hazard. Depositors do not fully account for the social benefits accruing from bank …

international lender of last resort with unlimited resources (a global central bank), while the second one could be operated by a …

We analyse a model in which bank deposits are insured and there is an exogenous cost of bank capital. The former effect … results in bank over-investment and the latter in under-investment. Regulatory capital requirements introduce investment … upon the home bank’s riskiness, the extent of international diversification, and the liability structure (branch or …