costly capital in a bank run model with endogenous bank portfolio choice and run probability, and show that capital … should be designed considering both sides of banks' balance sheet, and that its effectiveness depend on the costs of both …

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 …