efficient’. While Central Bank policy may have shifted radically now that stability is an explicit objective of policy, the same …

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 …

Banking regulation has proven to be inadequate to guard systemic stability in the recent financial crisis. Central …. Using a model of a systemic bank suffering from liquidity shocks, we find that the unregulated bank keeps too much liquidity … induces moral hazard. Therefore, we introduce a fiscal authority that is able to bail out the bank by injecting capital. This …

regulation is shown to operate at a collective level, regulating each bank as a function of both its joint (correlated) risk with … liability of banks and the presence of a negative externality of one bank’s failure on the health of other banks give rise to a … risk. Regulatory mechanisms such as bank closure policy and capital adequacy requirements that are commonly based only on a …

As the number of bank failures increases, the set of assets available for acquisition by the surviving banks enlarges … for liquidation of banking assets. At a sufficiently large number of bank failures, and in turn, at a sufficiently low … and allowing the regulator to price-discriminate against outsiders in the market for bank sales. …

of regulation only a gambling equilibrium will exist. In this case, either flat-rate capital requirements or binding …

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 …

-ante standpoint. We formalize this time-inconsistency of bank regulation. We also argue that by allowing banks to purchase failed …This Paper shows that bank closure policies suffer from a ‘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 all failed banks, whereas when the number of bank …