This paper focuses on the stability aspects of cross-border banking. We first argue that cross-border banking brings about various benefits and costs for financial stability. Based on this, we draw conclusions for the desirability of cross-border banking in the EU, and derive implications for...

This paper focuses on the stability aspects of cross-border banking. We first argue that cross-border banking brings about various benefits and costs for financial stability. Based on this, we draw conclusions for the desirability of cross-border banking in the EU, and derive implications for...

A puzzle posed by the subprime crisis is that even though financial development has made traditional bank assets less opaque, the opacity of banks themselves seems to have increased. This paper offers an explanation. I show that financial development which reduces the opacity of bank assets can...

A main cause of the ongoing financial crisis is the various ways through which banks have transferred credit risk in the financial system. In this paper we study the riskiness of banks that have used these methods, as perceived by the market. For this we analyze a sample of banks that trade...

We propose a new method for measuring the quality of banks' credit portfolios. This method makes use of information embedded in bank share prices by exploiting differences in their sensitivity to credit default swap spreads of borrowers of varying quality. The method allows us to derive a credit...

One of the most important recent innovations in financial markets has been the development of credit derivative products that allow banks to more actively manage their credit portfolios than ever before. We analyse the effect that access to these markets has had on the lending behaviour of a...

Financial institutions have reached beyond their traditional activities in recent years and have become more homogenous as a result. We show that, although the resulting diversification gains make institutions appear individually less risky, financial stability does not necessarily improve since...

The emerging markets for credit derivatives have improved the liquidity of bank assets by providing banks with various new possibilities for selling and hedging their risks. This paper examines the consequences for banking stability. In a simple model where liquidation of bank assets is costly,...

In this paper, we study the impact of credit risk transfer (CRT) on the stability and the efficiency of a financial system in a model with endogenous intermediation and production. Our analysis suggests that with respect to CRT, the individual incentives of the agents in the economy are...

In this paper we study the impact of credit risk transfer (CRT) on the stability and the efficiency of a financial system in a model with endogenuous intermediation and production. Our analysis suggests that with respect to CRT, the individual incentives of the agents in the economy are...