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 …

creating counter-cyclical incentives for banks to raise capital, and so encourage bank lending in bad times. They avoid the …

investors to be less prone to run individual banks, but runs will be systemic. In addition, we show that bank runs are …

Government guarantees to financial institutions are intended to reduce the likelihood of runs and bank failures, but …-offs based on the global-games literature and its application to bank runs. We derive several results, some of which against … common wisdom. First, guarantees reduce the probability of a run, taking as given the amount of bank risk taking, but lead …

pre-crisis bank behavior, and suggest implications for the optimal design of capital regulation. …

bank suffering from liquidity shocks, we find that the unregulated bank keeps too much liquidity and monitors too little. A … central bank can alleviate the liquidity problem, but induces moral hazard. Therefore, we introduce an additional authority … that is able to bail out the bank either by injecting capital at a fixed return or by receiving an equity claim. This …

asymmetric information and no excess profits. It captures the possibility of bank runs and business cycle risk; but it ignores …