Pierret (2015) presents empirical analysis of the solvency-liquidity nexus for the banking system, documenting that a shock to the level of banks' solvency risk is followed by lower short-term debt. Conversely, higher short-term debt Granger-causes higher solvency risk. These results point...

Bank holding companies (BHCs) can be complex organizations, conducting multiple lines of business through many distinct legal entities and across a range of geographies. While such complexity raises the costs of bank resolution when organizations fail, the effect of complexity on BHCs' broader...

The supplementary leverage ratio (SLR) rule recently imposed on the very largest U.S. banks has revived the question of whether banks sidestep such rules by shifting toward riskier, higher-yielding assets. Using difference-in-difference analysis, we find that, after the SLR was finalized in...

This paper explores the advantages of a new financial charter for large, complex, internationally active financial institutions that would address the corporate governance challenges of such organizations, including incentive problems in risk decisions and the complicated corporate and...

This paper investigates the incentives for banks to bias their internally generated risk estimates. We are able to estimate bank biases at the credit level by comparing bank-generated risk estimates within loan syndicates. The biases are positively correlated with measures of regulatory capital,...

Bank capital requirements are based on a mix of market values and book values. We investigate the effects of a policy change that ties regulatory capital to the market value of the "available-for-sale" investment securities portfolio for some banking organizations. Our analysis is based on...

We explore the design of climate stress tests to assess and manage macro-prudential risks from climate change in the financial sector. We review the climate stress scenarios currently employed by regulators, highlighting the need to (i) consider many transition risks as dynamic policy choices;...

We find that banks' credit exposures to transition risks are modest. We build on the estimated sectoral effects of climate transition policies from general equilibrium models. Even when we consider the strictest policies or the most adverse scenarios, exposures do not exceed 14 percent of banks'...

A 2012 paper by Goodhart, Kashyap, Tsomocos, and Vardoulakis (GKTV) proposes a dynamic general equilibrium framework that provides a conceptual - and to some extent quantitative - framework for the analysis of macroprudential policies. The distinguishing feature of GKTV's paper relative to any...

We summarize and evaluate Fannie Mae and Freddie Mac's credit risk transfer (CRT) programs, which have been used since 2013 to shift a portion of credit risk on more than $1.8 trillion of mortgages to private sector investors. We argue that the CRT programs have been successful in reducing the...