. Empirically, we find that intermediary leverage is negatively aligned with the banks' Value-at-Risk (VaR). Motivated by the …

Does the mere presence of big banks affect macroeconomic outcomes? In this paper, we develop a theory of granularity … (Gabaix, 2011) for the banking sector, introducing Bertrand competition and heterogeneous banks charging variable markups …. Using this framework, we show conditions under which idiosyncratic shocks to bank lending can generate aggregate …

. Banks have a low cost of capital due to, say, safety nets or money-like liabilities. We show, however, that this can be a … disadvantage, because it exacerbates soft-budget-constraint problems, making it costly to finance innovative projects. Non-banks … capital, solving soft-budget-constraint problems. Still, non-banks never take over the entire market, but coexist with banks …

Banks are optimally opaque institutions. They produce debt for use as a transaction medium (bank money), which requires … that information about the backing assets - loans - not be revealed, so that bank money does not fluctuate in value …, needed for allocative efficiency. Intermediaries exist to hide such information, so banks select portfolios of information …

Japanese stock prices fell, banks' latent capital gains, which are part of tier II capital, became smaller. Empirical findings … are consistent with a view that banks with lower capital ratios tended to issue more subordinated debts (tier II) and to …