Remarks at the Andrew Crockett Memorial Lecture, Bank for International Settlements 2013 Annual General Meeting, Basel …

Banks’ leverage choices represent a delicate balancing act. Credit discipline argues for more leverage, while balance …, but also create perverse incentives for banks to engage in correlated asset choices and to hold little equity capital. As … a way to cope with these distorted incentives, we outline a two-tier capital framework for banks. The first tier is a …

In moral hazard models, bank shareholders have incentives to transfer wealth from the deposit insurer - that is …, maximize put option value - by pursuing riskier strategies. For safe banks with large charter value, however, the risk … value, and a risk measure, this paper develops a semi-parametric model for estimating the critical level of bank risk at …