We study a monetary, general equilibrium economy in which banks exist because they provide intertemporal insurance to risk-averse depositors. A quot;banking crisisquot; is defined as a case in which banks exhaust their reserve assets. Under different model specifications, the banking industry is...

This paper studies two new models in which banks face a non-trivial asset allocation decision. The first model (CVH) predicts a negative relationship between banks' risk of failure and concentration, indicating a trade-off between competition and stability. The second model (BDN) predicts a...