Recent studies suggest liquidity regulation contributed to the rise in excess reserves, but capital regulations may matter, too. We use a simple model to show that banks may tilt portfolios away from higher risk-weighted assets like loans and toward lower risk-weighted assets like reserves and...

We study the transmission mechanisms of liquidity and capital regulations as well as their effects on the economy and welfare. We propose a macro-economic model in which a regulator faces the following trade-off. On the one hand, banking regulations may reduce the aggregate supply of credit. On...

In the wake of the financial crisis of 2007-09, the Basel Committee on Banking Supervision recommended bank regulators adopt a new short-term liquidity requirement, the liquidity coverage ratio (LCR), to promote greater liquidity resilience. U.S. bank regulators announced the final rule...

The aim of this working paper is to introduce the reader to the relatively new instrument of AT 1 bonds. For this purpose, the strict regulatory requirements for the instrument class are explained and the capital requirements of banks are outlined. Afterwards, the market for AT 1 bonds is...

Common explanations for the observed rise in excess bank reserves include payment of interest on reserves and liquidity regulations, but capital regulations may also matter. We show that a profit maximizing bank substitutes from higher risk-weight loans to lower risk-weight reserves and...

Recent evidences provoke broad rethinking of the role of banks in money creation. The authors argue that apart from the reserve requirement, prudential regulations also play important roles in constraining the money supply. Specifically, they study three Basel III regulations and theoretically...

Price-based liquidity metrics are better in 2013-2014 for small trades and large high-yield bond trades, but not for large investment grade bond trades, relative to before the crisis, and are better for all bond types and trade sizes relative to 2010-2012. This evidence contrasts with the...

We summarize and evaluate Fannie Mae and Freddie Mac's credit risk transfer (CRT) programs, which have been used since 2013 to shift a portion of credit risk on more than $1.8 trillion of mortgages to private sector investors. We argue that the CRT programs have been successful in reducing the...

We take issue with claims that the funding mix of banks, which makes them fragile and crisis-prone, is efficient because it reflects special liquidity benefits of bank debt. Even aside from neglecting the systemic damage to the economy that banks' distress and default cause, such claims are...

We take issue with claims that the funding mix of banks, which makes them fragile and crisisprone, is efficient because it reflects special liquidity benefits of bank debt. Even aside from neglecting the systemic damage to the economy that banks' distress and default cause, such claims are...