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 …

creating counter-cyclical incentives for banks to raise capital, and so encourage bank lending in bad times. They avoid the …

investors to be less prone to run individual banks, but runs will be systemic. In addition, we show that bank runs are …

Government guarantees to financial institutions are intended to reduce the likelihood of runs and bank failures, but …-offs based on the global-games literature and its application to bank runs. We derive several results, some of which against … common wisdom. First, guarantees reduce the probability of a run, taking as given the amount of bank risk taking, but lead …

pre-crisis bank behavior, and suggest implications for the optimal design of capital regulation. …