good lending opportunities are in short supply, so that banks have to compete for projects. In such a setting, borrowers … may demand that banks commit to monitoring by requiring that they use some of their own capital in lending, thus creating … an asset market-based incentive for banks to hold capital. Borrowers can also provide banks with incentives to monitor by …

with banking and insurance sectors, we show that credit risk transfer can be beneficial when banks face uniform demand for …

insurance sector can cause the current value of banks' assets to be less than the current value of their liabilities so the … banks are insolvent. In contrast, if historic cost accounting is used, banks are allowed to continue and can meet all their …

Banks are intrinsically fragile because of their role as liquidity providers. This results in under-provision of … liquidity. We analyze the effect of government guarantees on the interconnection between banks' liquidity creation and … likelihood of runs in a model of global games, where banks.and depositors' behavior are endogenous and affected by the amount and …

. Specifically, banks originating from a country that has lower level of trust tend to have lower interbank borrowing. Using a … the network structure of interbank markets. Core banks acting as interbank intermediaries in the network are more …

that they may create a serious problem for the stability of the foreign banks' subsidiaries. Moreover, as some of those … subsidiary banks were large by assets in some of the member states the related party transactions with the parent bank created a …

finance for banks. Despite risk neutrality, equity capital earns a higher expected return than direct investment in risky … assets. Banks hold positive capital to reduce bankruptcy costs, but there is a role for capital regulation when deposits are … insured. Banks may no longer use capital when they lend to firms rather than invest directly in risky assets. This depends on …

We develop a model in which asset commonality and short-term debt of banks interact to generate excessive systemic risk …. Banks swap assets to diversify their individual risk. Two asset structures arise. In a clustered structure, groups of banks … quality of individual banks is opaque but can be inferred by creditors from aggregate signals about bank solvency. When bank …