, 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 …

burden of the banking sector is modest. We model a regulator whose trade-off between bank risk and credit supply is derived … has through bank incentives. The larger the correlation between banks' projects, the more important the role for monetary … policy. In a dynamic setting, not internalizing bank risk leads a monetary authority to keep rates low for too long after a …

Simultaneous bank defaults are often attributed to interbank contagion, but can also be due to common shocks affecting … banks with similar balance sheets. We disentangle both effects by realising that if financial markets expect a bank …'s default to be contagious, an increase in this bank's default probability should lower other banks' market valuations. When we …

We show by means of a bank relationship model that after monetary policy tightening, public firms (having easier access … to public capital markets) are more likely to decrease their demand for bank loans than private firms (which are … typically more dependent on bank credit and benefit more from relationship lending). This 'relationship lending' hypothesis is …

results indicate that private firms, which appear to be more dependent on bank debt for external funds, are more susceptible …

. Negative media reports, falling stock prices, and opaque product information also affect trust in banks. Experiencing a bank … bailout leads to less concern about government intervention, while experience of a bank failure leads to greater concern on …