We study the macroprudential roles of bank capital regulation and monetary policy in a borrowing cost channel model with endogenous financial frictions, driven by credit risk, bank losses and bank capital costs. These frictions induce financial accelerator mechanisms and motivate the examination...

This paper explores monetary-macroprudential policy interactions in a simple, calibrated New Keynesian model incorporating the possibility of a credit boom precipitating a financial crisis and a loss function reflecting financial stability considerations. Deploying the countercyclical capital...

The global financial crisis prompted the rapid development of macro-prudential frameworks and an increased reliance on borrower-based policy tools, which influence the demand for credit. This paper studies the optimal design of one such tool, a loan-to-value (LTV) limit, and its implications for...

While the too-big-to-fail guarantee is explicitly a part of bank regulation in many countries, this paper shows that bank closure policies also suffer from an implicit too-many-to-fail problem: when the number of bank failures is large, the regulator finds it ex-post optimal to bail out some or...

Our paper analyses confidential letters sent from the Bank of England's Prudential Regulation Authority (PRA) to banks and building societies it supervises. These letters are a ‘report card' written to firms annually, and are arguably the most important, regularly recurring written...

The banking reforms that followed the financial crisis of 2007–08 led to an increase in UK banking regulation from almost 400,000 to over 720,000 words, and to concerns about their complexity. We define complexity in terms of the difficulty of processing linguistic units, both in isolation and...

We investigate how counterparties' characteristics, and the collateral they use, interact with their demand for liquidity in the Bank of England's (BoE) operations. Between 2010 and 2016 there was regular usage of two BoE facilities: Indexed Long-Term Repos (ILTR) and the Funding for Lending...

This paper examines whether cross-border spillovers of macroprudential regulation depend on the organisational structure of banks' foreign affiliates. Our analysis compares the response of foreign banks' branches versus subsidiaries in the United Kingdom to changes in macroprudential regulations...

We use a DSGE model with financial frictions, leverage limits on banks, loan to value (LTV) limits and debt‑service ratio (DSR) limits on mortgage borrowing to examine: i) the effects of different macroprudential policies on key macro aggregates; ii) their interaction with each other and with...

Banks' liquidity is a crucial determinant of the adversity of banking crises. In this paper, we consider the effect of fire sales and entry during crises on banks' ex-ante choice of liquid asset holdings. We consider a setting with limited pledgeability of risky cash flows relative to safe ones...