Traditional theory suggests that high franchise value limits bank risk-taking incentives. Then why did many banks with … paper attempts to reconcile theory and evidence. We consider a setup where a bank takes risk by levering up, to invest in … risky market-based instruments. High franchise value allows the bank to borrow more, so it can take risk on a larger scale …

requirements. It extends the Stiglitz-Weiss model of credit rationing to allow for bank default. Bank capital structure then …. Introducing bank financiers, the paper also shows that uninsured funding raises the sensitivity of rationing to capital …

In this study we disentangle two dimensions of banks' systemic risk: the level of bank tail risk and the linkage … between a bank's tail risk and severe shocks in the financial system. We employ a measure of the systemic risk of financial … bank characteristics are related to bank tail risk and systemic linkage. The interrelationship between bank characteristics …

banks. However if in extreme scenarios the LCR becomes a binding constraint, the interaction of bank behaviour with the …-testing model, which takes into account the impact of bank reactions on second round feedback effects. We show that a flexible …

, diversify, and lower their lending standards. Bank leverage increases shareholder value because maturity transformation … effectively allows banks to borrow against lower interest rates than their shareholders. Bank diversification increases … shareholder value by enabling banks to lever more. When the gains from maturity transformation are passed on to bank customers …

account the capital adequacy requirements posed by the regulator. By easing its lending conditions a bank faces a tradeoff … conditions and the level of bank capital. In this extended model it turns out that it may be beneficial for a bank to hold more …

account the capital adequacy requirements posed by the regulator. By easing its lend- ing conditions a bank faces a tradeoff … conditions and the level of bank capital. In this extended model it turns out that it may be beneficial for a bank to hold more …

. Bank management of both banks choose optimal levels of loans provided, equity ratio and e.ort to reduce loan losses so as … the constrained bank, whereas the pro.tability of its unrestricted competitor declines. Especially, if an ine.cient bank … stimulate banks to provide more loans. Too high requirements on the other hand relatively favour the ine.cient bank, and result …