Today’s regulatory rules, especially the easily-manipulated measures of regulatory capital, have led to costly bank … failures. We design a robust regulatory system such that (i) bank losses are credibly borne by the private sector (ii …) systemically important institutions cannot collapse suddenly; (iii) bank investment is counter-cyclical; and (iv) regulatory …

value of the bank and its volatility by using an indifference curve model of the bank’s choice of optimal risk. While the … first-best optimal risk maximises the value of the bank, the shareholders select suboptimally high risks under bail … consequences of the DAPR (Deviation from the Absolute Priority Rule) the bondholders are forced to closely monitor the bank …

after controlling for bank-specific and market risk factors. Large banks on average pay 80 basis points and 70 basis points …

We argue that contingent convertible capital (CoCo-Bonds) might have perverse risk-taking incentives for banks (asset … overhang problem). Whenever the conversion price is set too high - as in the case of the Lloyds CoCo-Bond issuance in November …-Bond convert into equity once the equity ratio falls below a certain threshold and CoSu-Bond holders take over the bank while …

disciplining role are based on inadequate theory lacking empirical support. We conclude that bank equity is not socially expensive …

lacking empirical support. We conclude that bank equity is not socially expensive, and that high leverage at the levels …

Banks cannot be made fail-safe. But they can be made safe to fail, so that the failure of a bank need not disrupt the … amounts to a pre-pack reorganization of the bank that the resolution authority can implement over a weekend, if the bank … principal elements: (i) a recapitalization of the bank through the bail-in of investor instruments and (ii) the provision of …

, associated with the equity-conversion and writedown CoCo bonds. By focusing on the costs as those stemming from the deviation … from absolute priority rule (DAPR), we derive the expressions for the CoCo bonds and show that both agency costs are …

Building an unbalanced panel of United States (US) bank holding company (BHC) and commercial bank balance sheet data … management of such adjustments is dependent on the degree of bank capitalization. Further investigation through time …