Eijffinger, Sylvester C W; Nijskens, Rob - C.E.P.R. Discussion Papers - 2012
to liquidity assistance as a solution to forbearance. Faced with a bank that chooses capital and liquidity, the … credible, while always bailing out causes moral hazard. In equilibrium, the bank chooses above minimum capital and liquidity … is higher for a regulator more concerned about bank failure, and when the bailout penalty for the bank is higher; this …