, 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 …

This paper models a financial sector in which there is a feedback between individual bank risk and aggregate funding … premia on that market push up bank risk taking, leading to multiple equilibria. The model identifies shifts among equilibria … as a function of parameter shocks. Measures that reduce individual bank default risk within an equilibrium can actually …

The Basel 3 Liquidity Coverage Ratio (LCR) is a micro prudential instrument to strengthen the liquidity position of … banks. However if in extreme scenarios the LCR becomes a binding constraint, the interaction of bank behaviour with the … regulatory rule can have negative externalities. We simulate the systemic implications of the LCR by a liquidity stress …

determinants of banks' liquidity buffers are a combination of bank-specific (business model, profitability, deposit holdings, size … substituted by liquidity regulation, a bank's disclosure requirement and size remain significant. A key takeaway from our analysis …We assess the determinants of banks' liquidity holdings using balance sheet data for nearly 7000 banks from 30 OECD …