Today’s regulatory rules, especially the easily-manipulated measures of regulatory capital, have led to costly bank … failures. We design a robust regulatory system such that (i) bank losses are credibly borne by the private sector (ii …) systemically important institutions cannot collapse suddenly; (iii) bank investment is counter-cyclical; and (iv) regulatory …

the security level for each bank in each period, we find that during the crisis, banks with higher trading expertise …

requirements, more so by banks with less capital, and while still providing recourse to bank balance sheets for outside investors …

bank lending to examine what an optimal combination of monetary policy and regulatory capital requirements might look like … that equilibrium level of central bank policy rates should be lower than they had been prior to the crisis. …

capital. Capital serves to ameliorate a moral hazard problem in the choice of risk. There is a fixed aggregate supply of bank … social welfare function that incorporates a social cost of bank failure. We consider the effect of a negative shock to the … supply of bank capital and show that optimal capital requirements should be lowered. Failure to do so would keep banks safer …

This paper studies the strategic interaction between a bank whose deposits are randomly withdrawn, and a lender of last … resort (LLR) that bases its decision on supervisory information on the quality of the bank’s assets. The bank is subject to a …. Moreover, when the LLR does not charge penalty rates, the bank chooses the same level of risk and a smaller liquidity buffer …

We analyse the implications for the pricing of bank loans of the reform of capital regulation known as Basel II. We …-sensitive standardized approach of Basel II. We also show that only an extremely high social cost of bank failure might justify the proposed …