This paper analyzes financial institutions' capital allocation decisions when their required equity capital depends on … can be delegated through an economic value added (EVA) compensation contract and solve for the optimal capital allocation … precisely the notion of risk-adjusted return on capital (RAROC) and how it can be used as a performance measure. …

that is able to bail out the bank either by injecting capital at a fixed return or by receiving an equity claim. This …

Banking regulation has proven to be inadequate to guard systemic stability in the recent financial crisis. Central … induces moral hazard. Therefore, we introduce a fiscal authority that is able to bail out the bank by injecting capital. This …

regulators try to resolve these problems. We find that liberalizing bank capital flows between economies reduces total welfare by … reducing the average size and efficiency of the banking sector. This effect can be countered by a adopting a 'level playing … field' forcing international harmonization of capital requirements and deposit rates across economies. Such a policy is good …

government support induces moral hazard. It shows that banks tend to be more leveraged, funded with capital of lower quality …, and regulations that can be put in place to reduce moral hazard induced by implicit guarantees to the banking sector. …

are largest for trading-expertise banks with higher capital and in securities with lower rating and long-term maturity. In … reduce lending relative to other banks. This effect is more pronounced for trading-expertise banks with higher capital, and …

public finances and banking systems heavily exposed to southern Europe and Ireland benefited, as evidenced by lower sovereign …

Bailout expectations have led banks to behave imprudently, holding too little capital and relying too much on short … to liquidity assistance as a solution to forbearance. Faced with a bank that chooses capital and liquidity, the … credible, while always bailing out causes moral hazard. In equilibrium, the bank chooses above minimum capital and liquidity …

We study the effects of a bank’s engagement in trading. Traditional banking is relationship-based: not scalable, long …-term oriented, with high implicit capital, and low risk (thanks to the law of large numbers). Trading is transactions …-based: scalable, short-term, capital constrained, and with the ability to generate risk from concentrated positions. When a bank …

This paper analyses two aspects of banking crises: the choices that banks make to passively roll over loans in default …