, including any effects on the cost of capital and in turn the rates available to borrowers. Standard theory predicts that, in … perfect and efficient capital markets, reducing banks' leverage reduces the risk and cost of equity but leaves the overall …-capitalized banks has lower systematic risk (beta) and lower idiosyncratic risk. However, over the last 40 years, lower risk banks have …

How do banks respond to asset booms? This paper examines i) how U.S. banks responded to the World War I farmland boom … formation and balance sheet expansion (especially by new banks). Deposit insurance amplified the impact of rising crop prices on … bank portfolios, while higher minimum capital requirements dampened the effects. Banks that responded most aggressively to …

We develop a tractable model of banks' liquidity management and the credit channel of monetary policy. Banks finance … loans by issuing demand deposits. Loans are illiquid, and transfers of deposits across banks must be settled with reserves … in a frictional over the counter market. To mitigate the risk of large withdrawals of deposits, banks hold a …

Time-inconsistency of no-bailout policies can create incentives for banks to take excessive risks and generate … leads to strategic restraint banks endogenously restrict the riskiness of their portfolio relative to their peers in order …

compensation for the illiquidity investors will be subject to. We argue that banks can resolve these liquidity problems that arise … in direct lending. Banks enable depositors to withdraw at low cost, as well as buffer firms from the liquidity needs of …

Countercyclical capital buffers (CCyBs) are an old idea recently resurrected. CCyBs compel banks at the core of …. To gauge the potential impact of modern CCyBs, we compare the behavior of large and highly-connected commercial banks … during booms before the Great Depression and Great Recession. Before the former, core banks did not expect bailouts and were …

Commercial banks are subject to regulation that restricts their investments. When banks are concerned for their …