The moral hazard incentives of the bank safety net predict that distressed banks take on more risk and higher leverage … include financial crises and are subject to different regulatory regimes (1985–1994, 2005–2014). We find that distressed banks …

We investigate why only some banks use regulatory arbitrage. We predict that banks wanting to be riskier than allowed … by capital regulations (constrained banks) use regulatory arbitrage while others do not. We find support for this … hypothesis using trust preferred securities (TPS) issuance, a form of regulatory arbitrage available to almost all U.S. banks …

risky banks, thereby creating market discipline. An alternative perspective is that market discipline is limited (e.g., due … to deposit insurance and/or enhanced capital regulation) and that internal demand for funding by banks determines rates … capitalization levels. In contrast, banks' loan growth has a causal effect on deposit rates: e.g., branches' deposit rates are …