The regulatory framework established during the Great Depression spared us system-threatening financial failure for nearly four decades after World War II. The author gives a brief history of how the progressive deregulation of the financial system led to the crisis of 2008 and discusses the...

We can end the banking crisis immediately by offering temporary 100% deposit insurance to those banks that need it. In exchange the federal government should receive shares in those banks - a stake that would grow, the longer the insurance is provided. Moreover, as long as the insurance is...

We study two designs for a liquidity-saving mechanism (LSM), a queuing arrangement used with an interbank settlement system. We consider an environment where banks are subjected to liquidity shocks. Banks must make the decision to send, queue, or delay their payments after observing a noisy...

A recent innovation in large-value payments systems has been the design and implementation of liquidity-saving mechanisms (LSMs), tools used in conjunction with real-time gross settlement (RTGS) systems. LSMs give system participants, such as banks, an option not offered by RTGS alone: they can...

Central banks focus on two objectives today: monetary and financial stability. Empirical evidence on this twin objective is scarce. We aim to contribute on the issue with an integrated micro-macro approach with two core virtues. First, we measure financial stability at the bank level for...

Financial sector liberalization, both domestic and in cross-border transactions, was a major force behind the gradual move to indirect controls and the shift toward full reliance on exchange rate targeting in the Netherlands. This paper analyzes the different steps in this process, discusses the...

Credit extensions to banks using the Fedwire Funds Service - the Federal Reserve's real-time gross settlement (RTGS) payments system - can reach intraday peaks as high as $86 billion. This article evaluates the effectiveness of alternative methods of settling Fedwire payments in reducing...

Empirical evidence suggests that banking panics are a natural outgrowth of the business cycle. In other words panics are not simply the result of quot;sunspotsquot; or self-fulfilling prophecies. Panics occur when depositors perceive that the returns on the bank's assets are going to be...

The reform of bank supervision represents one of the great institutional challenges for the European Union. The recent pattern of cross-border failures in supervision reflects the extent to which a better functioning system of supervision is critical for the safe operation of the banking system...

This paper considers the welfare effects of introducing a liquidity-saving mechanism (LSM) in a real-time gross settlement (RTGS) payment system. We study the planner's problem to get a better understanding of the economic role of an LSM and find that an LSM can achieve the planner's allocation...