interconnectedness on the banks' failure probability can be alleviated if bank capital regulation is properly designed. This paper …This paper proposes that whether interconnectedness among banks leads to financial instability depends on banks … and the banks' failure probability. In the model, banks adopt the Value-at-Risk rule to make the capital structure …

We study the efficiency of banking regulation under financial integration. Banks freely choose the jurisdiction where … any regulatory contract that satisfies information and participation constraints of banks. We show that the unique Nash … regulators to discriminate between banks with different efficiency levels. This result is driven by the endogenous restriction …