Under the new Capital Accord, banks choose between two different types of risk management systems, the standard or the … internal rating based approach. The paper considers how a bank's preference for a risk management system is affected by the … presence of supervision by bank regulators. The model uses a principal-agent setting between a bank's owner and its risk …

circumstances. The model, which measures additional bank capital required to compensate for fluctuating credit risk, is a novel …) which measures additional returns to compensate for additional share price risk. …

-term resilience. We investigate the effects of such liquidity regulation on bank liquid assets and liabilities. Results indicate co …-integration of liquid assets and liabilities, to maintain a minimum short-term liquidity buffer. Still, microprudential regulation … risk taking. Our error correction regressions indicate that adjustment in the liquidity ratio is balanced towards the …

This paper discusses liquidity regulation when short-term funding enables credit growth but generates negative systemic … risk externalities. It focuses on the relativemerit of price versus quantity rules, showing how they target different … incentives for risk creation.When banks differ in credit opportunities, a Pigovian tax on short-term funding is efficient in …

How do near-zero interest rates affect bank competition, risk taking and regulation? I study these questions in a … risk shifting incentives, particularly if rates are expected to remain near-zero for long. At the ZLB, capital regulation … insurance may induce excessive risk taking. The zero lower bound on deposit rates (ZLB) distorts bank competition and boosts …

I analyze welfare properties of mutual funds in the Diamond-Dybvig model with two sources of aggregate risk …: undiversifiable interest rate risk and shocks to aggregate liquidity demand. Mutual funds are inefficient when the economy faces … undiversifiable interest rate risk. However, if only aggregate liquidity demand is stochastic, mutual funds can implement the social …

We assess the influence of competition and capital regulation on the stability of the banking system. We particularly … ask two questions: i) how does capital regulation affect (endogenous) entry; and ii) how do (exogenous) changes in the … competitive environment affect bank monitoring choices and the effectiveness of capital regulation? Our approach deviates from the …