behavior. By paying out dividends, a bank transfers value to its shareholders away from creditors, among whom are other banks …. This way, one bank's dividend payout policy affects the equity value and risk of default of other banks. When such negative … externalities are strong and bank franchise values are not too low, the private equilibrium can feature excess dividends relative to …

across banks. In particular, by paying out dividends, a bank transfers value to its shareholders away from its creditors, who … in turn are other banks. This way, one bank's dividend payout policy aects the equity value and risk of default of otther … banks. When such negative externalities are strong and bank franchise values are not too low, the private equilibrium can …

liability of banks and the presence of a negative externality of one bank’s failure on the health of other banks give rise to a … risk. Regulatory mechanisms such as bank closure policy and capital adequacy requirements that are commonly based only on a … bank’s own risk fail to mitigate aggregate risk-shifting incentives, and can, in fact, accentuate systemic risk. Prudential …

This Paper shows that bank closure policies suffer from a ‘too-many-to-fail’ problem: when the number of bank failures … is large, the regulator finds it ex-post optimal to bail out some or all failed banks, whereas when the number of bank …-ante standpoint. We formalize this time-inconsistency of bank regulation. We also argue that by allowing banks to purchase failed …

ex-post aspect, in which the failure of a bank brings down a surviving bank as well, and second, the ex-ante aspect, in … which banks endogenously hold correlated portfolios increasing the likelihood of joint failure. When bank loan returns have … a systematic factor, the failure of one bank conveys adverse information about this systematic factor and increases the …

As the number of bank failures increases, the set of assets available for acquisition by the surviving banks enlarges … for liquidation of banking assets. At a sufficiently large number of bank failures, and in turn, at a sufficiently low … and allowing the regulator to price-discriminate against outsiders in the market for bank sales. …