The goal of this paper is to provide a framework to analyze the effectiveness of bank coalition formation in response … the kind of insurance mechanism provided by a specific type of bank coalition allows society to completely prevent any … disruption to real activity that can be caused by a temporary drop in the value of banking assets, at least in the case of a …

Consider a competitive bank whose illiquid asset portfolio is funded by short-term debt that has to be refinanced … of social externalities of bank failures further lowers the optimal level of transparency. Moreover, asset risk taking …