deposits excessively fragile in which case there is a role for outside bank capital. Greater bank capital reduces liquidity … creation by the bank but enables the bank to survive more often and avoid distress. A more subtle effect is that banks with … different amounts of capital extract different amounts of repayment from borrowers. The optimal bank capital structure trades …

The first part of this paper provides a historical perspective on bank risks. Five-year moving average measures of … outside New York banks from 1950-1976.We use a carefully constructed series of bank balance sheet data to compute correlations … proposed in Sharpe ("Bank Capital Adequacy, Deposit Insurance and Security Values," June 1978) to gain information about …

of deposit insurance as a function of capital-asset ratio for a bank with demand liabilities and longer term, default …

issuance of common stock was negative due to repurchases. We assume that, in the absence of capital requirements, a bank has an … optimal capital structure that depends on its business model. Capital requirements can impose constraints on bank decisions …. If a bank's optimal capital structure also meets regulatory capital requirements with a sufficient buffer, the bank is …

We develop a model of the joint capital structure decisions of banks and their borrowers. Strikingly high bank leverage … emerges naturally from the interplay between two sets of forces. First, seniority and diversification reduce bank asset … underlie our structural model, we can quantify the impact capital regulation and other government interventions have on bank …