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Contagious bank runs : experimental evidence
Brown, Martin; Trautmann, Stefan T.; Vlahu, Razvan - 2012
We conduct a laboratory experiment to examine under which circumstances a depositor-run at one bank may lead to a depositor-run at another bank. We implement two-person coordination games which capture the essence of the Diamond-Dybvig (1983) bank-run model. Subjects in the roles of followers...
Persistent link: https://www.econbiz.de/10010407054
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Capital Regulation and Tail Risk
Perotti, Enrico C. - 2011
The paper studies risk mitigation associated with capital regulation, in a context where banks may choose tail risk assets. We show that this undermines the traditional result that higher capital reduces excess risk-taking driven by limited liability. Moreover, higher capital may have an...
Persistent link: https://www.econbiz.de/10013118958
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Strategic Loan Defaults and Coordination : An Experimental Analysis
Trautmann, Stefan - 2011
This paper experimentally studies the impact of uncertainty about bank and borrower fundamentals on loan repayment. We find that solvent borrowers are more likely to default strategically when stricter disclosure creates common knowledge about bank weakness. Borrowers are also less likely to...
Persistent link: https://www.econbiz.de/10013118964
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The Economic Perspective of Bank Bankruptcy Law
Marinc, Matej - 2011
This paper argues that a special bank bankruptcy regime is desirable for the efficient restructuring and/or liquidation of distressed banks. We first explore the principal features of corporate bankruptcy law. Next, we examine the specific characteristics that distinguish banks from other...
Persistent link: https://www.econbiz.de/10013118965
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A Pigovian Approach to Liquidity Regulation
Perotti, Enrico C. - 2011
This paper discusses liquidity regulation when short-term funding enables credit growth but generates negative systemic … incentives for risk creation. When banks differ in credit opportunities, a Pigovian tax on short-term funding is efficient in … containing risk and preserving credit quality, while quantity-based funding ratios are distorsionary. Liquidity buffers are …
Persistent link: https://www.econbiz.de/10013118982
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Monetary Policy and Excessive Bank Risk Taking
Agur, Itai - 2011
burden of the banking sector is modest. We model a regulator whose trade-off between bank risk and credit supply is derived …
Persistent link: https://www.econbiz.de/10013119110
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Capital Requirements and Credit Rationing
Agur, Itai - 2011
This paper analyzes the trade-off between financial stability and credit rationing that arises when increasing capital … requirements. It extends the Stiglitz-Weiss model of credit rationing to allow for bank default. Bank capital structure then …
Persistent link: https://www.econbiz.de/10013119224
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Bank Liquidity, the Maturity Ladder, and Regulation
de Haan, Leo - 2012
We investigate 62 Dutch banks' liquidity behaviour between January 2004 and March 2010, when these banks were subject to a liquidity regulation that is very similar to Basel III's Liquidity Coverage Ratio (LCR). We find that most banks hold more liquid assets against their stock of liquid...
Persistent link: https://www.econbiz.de/10013102548
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Identifying Systemically Important Financial Institutions : Size and Other Determinants
Moore, Kyle - 2012
This paper analyzes the conditions under which a financial institution is systemically important. Measuring the level of systemic importance of financial institutions, we find that size is a leading determinant confirming the usual 'Too Big To Fail' argument. Nevertheless, the relation is...
Persistent link: https://www.econbiz.de/10013103874
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Modelling the Liquidity Ratio as Macroprudential Instrument
van den End, Jan Willem - 2012
The Basel 3 Liquidity Coverage Ratio (LCR) is a micro prudential instrument to strengthen the liquidity position of banks. However if in extreme scenarios the LCR becomes a binding constraint, the interaction of bank behaviour with the regulatory rule can have negative externalities. We simulate...
Persistent link: https://www.econbiz.de/10013107337