. Anticipation of this generates an equilibrium featuring systemic risk in which all banks choose inefficiently high leverage to fund …

risk in which all banks choose inefficiently high leverage to fund correlated assets and market discipline is compromised … ; systemic risk ; bailout ; forbearance ; moral hazard ; capital requirements …

regular core capital requirement that helps deter excessive risk-taking incentives. The second tier, a novel aspect of our … framework, is a special capital account that limits risk taking but preserves creditors' monitoring incentives. -- capital … requirements ; leverage ; systemic risk …