We study the effects of a bank’s engagement in trading. Traditional banking is relationship-based: not scalable, long …-based: scalable, short-term, capital constrained, and with the ability to generate risk fromconcentrated positions. When a bank … inefficiencies.A bank may allocate too much capital to trading ex-post, compromising the incentives to build relationships ex …

Bank holding companies (BHCs) invest in risky projects through bank entities or sell projects for a fee, thus engaging … in shadow banking. BHCs can increase their fee income by guaranteeing sold projects with a recourse to the bank's balance … sheet. When the expected guarantee repayments depend on total bank proceeds (high capital requirements), BHCs have …

circumstances. The model, which measures additional bank capital required to compensate for fluctuating credit risk, is a novel …

internal rating based approach. The paper considers how a bank's preference for a risk management system is affected by the … presence of supervision by bank regulators. The model uses a principal–agent setting between a bank's owner and its risk … standard approach subsequent to becoming regulated, i.e., the presence of regulation may induce a bank to decrease the quality …