This paper reviews studies exploring how higher bank capital requirements affect economic growth. There is little evidence of a direct effect; research focuses on the indirect effects of capital requirements on credit supply, bank asset risk, and cost of bank capital, which in turn can affect...

We study the effect of going-concern contingent capital on bank risk choice. The possibility of debt for equity conversion forces deleveraging in highly levered states, when risk incentives are worse. The additional equity reduces endogenous risk shifting by diluting returns in high states. An...

Traditional theory suggests that high franchise value limits bank risk-taking incentives. Then why did many banks with exceptionally valuable franchises get exposed to new financial instruments, resulting in significant losses during the crisis? This paper attempts to reconcile theory and...

Several countries in Central, Eastern and Southeastern Europe used a rich set of prudential instruments in response to last decade’s credit and housing boom and bust cycles. We collect detailed information on these policy measures in a comprehensive database covering 16 countries at a...

During the last decade several CESEE countries built up high external liabilities vis-à-vis foreign banking sectors, with Austrian banks being important creditors. The provision of crossborder credit allowed for rapid financial deepening in many of these countries but also led to a build-up of...

Foreign banks have increased their market share in many emerging markets since the mid-1990s. We analyse the stability implications of foreign banks for cross-border and domestic bank lending in the global financial crisis. Our results suggest that a higher foreign bank presence was associated...

Foreign banks have increased their market share in many emerging markets since the mid-1990s. We examine whether this contributed to financial stability in the respective host countries in the global financial crisis. Our results suggest that the stabilizing impact of foreign banks was limited...

Within the last decade sizeable capital inflows from mature economies were accompanied by rapid financial deepening in the Western Balkans, Turkey and the CIS. Notwithstanding their considerably different initial positions most countries sustained financial stability in the first period of the...