This article examines the 2007 banking crisis from an interdisciplinary and, in particular, social constructivist perspective to identify its structural and systemic causes. After presenting and explaining a wide meta-theoretical framework that can accommodate different understandings of...

Recovery rates are negatively related to default probabilities (Altman et al., 2005). This paper proposes and estimates a model in which this dependence is the result of an unobserved credit cycle: When times are bad, the default probability is high and recovery rates are low; when times are...

My contention is that many of the current problems with 'Bankers’ Pay' have their origins in the dismantling of the formal and informal institutions which regulated the labour markets in the financial centres in London and New York prior to 1986-1987.

We present a model of an economy with heterogeneous banks that may be funded with uninsured deposits and equity capital. Capital serves to ameliorate a moral hazard problem in the choice of risk. There is a fixed aggregate supply of bank capital, so the cost of capital is endogenous. A regulator...

During the financial crisis, G20 countries compelled tax havens to sign bilateral treaties providing for exchange of bank information. Policymakers have celebrated this global initiative as the end of bank secrecy. Exploiting a unique panel dataset, our study is the first attempt to assess how...

This paper presents new models for aggregate UK data on mortgage possessions (foreclosures) and mortgage arrears (payment delinquencies). The innovations include the treatment of difficult to observe variations in loan quality and shifts in forbearance policy by lenders, by common latent...

Banks operating under Value-at-Risk constraints give rise to a welldefined aggregate balance sheet capacity for the banking sector as a whole that depends on total bank capital. Equilibrium risk and market risk premiums can be solved in closed form as functions of aggregate bank capital. We...

This paper analyzes banks’ choice between lending to firms individually and sharing lending with other banks, when firms and banks are subject to moral hazard and monitoring is essential. Multiple-bank lending is optimal whenever the benefit of greater diversification in terms of higher...

Corporate finance theories suggest that problems of asymmetric information and moral hazard in credit markets can be addressed by choosing short-term maturities. Theories of debt renegotiation suggest that the credibility of the implicit commitment to not make concessions to insolvent borrowers,...