We examine the financial stability implications of covered bonds. Banks issue covered bonds by encumbering assets on their balance sheet and placing them within a dynamic ring fence. As more assets are encumbered, jittery unsecured creditors may run, leading to a banking crisis. We provide...

We examine the financial stability implications of covered bonds. Banks issue covered bonds by encumbering assets on their balance sheet and placing them within a dynamic ring fence. As more assets are encumbered, jittery unsecured creditors may run, leading to a banking crisis. We provide...