I present a model in which the bank simultaneously borrows from the households and lends to a firm. The bank can monitor the firms cash flow but the households cannot. To truthfully report the cash flows to the households, the bank needs to be exposed to runs. However, the bank underinvests in...

One of the challenges of modern banks is providing uninsured wholesale depositors with a safe haven. We model banks deciding their own capital and liquidity levels in a forwardlooking manner to absorb an exogenous shock to their investment through interbank trading. A regulatory framework...

The recent empirical studies suggest that a change in the policy interest rate has a significant impact on the liquidity management of the banks.Focusing on the role of the interbank market in mitigating a trade-off associated with the cost of precautionary hoarding of liquidity, this paper...

In this chapter, our goal is to discuss whether and how bank lobbying in the United States leads to regulatory capture. First, we provide an overview of the importance of and motivations behind bank lobbying. Second, we examine the impact of lobbying on banking regulation and supervision by...

This paper studies the welfare effects of a “partial banking union” in which cross-country transfers for bailouts are set at the supranational level, but policymakers in member countries decide the distribution of funds. This allows the self-interested policymakers to extract rents in the...

Legislation takes place slowly and incrementally, much like evolution. Ideas in one field get transferred to others. New mutations and new fusions take place with apparently dissimilar partners creating a need for other adaptations. Such a fusion is now occurring between the banking industry and...

This paper argues that creditors reflect the financial-safety-net aspect of bank lobbying, plausibly considering the connection between bank lobbying and government bailouts. Using a structural approach, I show that bank lobbying is negatively associated with the occurrence of a run-like...

In this paper, we analyze how sources of political influence relate to the actual regulatory treatment of distressed banks and to the expectation of bank support provided by the government. We assemble a unique dataset that links U.S. banks' sources of influence (e.g., lobbying expenditures,...

In this paper, we discuss whether and how bank lobbying can lead to regulatory capture and have real consequences through an overview of the motivations behind bank lobbying and of recent empirical evidence on the subject. Overall, the findings are consistent with regulatory capture, which...