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How do regulators design bank capital requirements when banks can misreport the value of their assets? We show that the answer depends critically on the existence of secondary markets for bank assets. Without secondary markets, capital requirements based on banks' reporting are more socially...
Persistent link: https://www.econbiz.de/10013089790
This paper studies banks' decision whether to borrow from the interbank market or to sell assets in order to cover liquidity shortage in presence of credit risk. The following trade-off arises. On the one hand, tradable assets decrease the cost of liquidity management. On the other hand,...
Persistent link: https://www.econbiz.de/10013030763
This paper analyzes the role of expected income in entrepreneurial borrowing. We claim that poorer individuals are safer borrowers because they place more value on the relationship with the bank. We study the dynamics of a monopolistic bank granting loans and taking deposits from overlapping...
Persistent link: https://www.econbiz.de/10013094801