We present a network model of the interbank market in which optimizing risk averse banks lend to each other and invest … contribution of systemic risk by means of Shapley values. Within this framework we analyze the effects of prudential policies on … the stability/efficiency trade-off. Liquidity requirements unequivocally decrease systemic risk but at the cost of lower …

-over effects. Building on a simple model, this paper introduces a measure of the spill-over effects that a bank generates when it … defaults. The measure is based on an explicit criterion, the aggregate debt repayments, and is bank’s specific, affected by the … bank’s characteristics and links to other banks. Such measure can be useful to a regulator to determine in which banks cash …

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 …

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 …

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 …