Since the European debt crisis economists and politicians discuss intensively the sovereign-bank nexus. The high … exposure on bank stability. This paper provides a new way to use European stress test data to study this relationship. In … addition, we explore the effect on a bank’s probability of default if the existing capital requirement privilege for EU …

A simple portfolio choice model shows that, when a bank's capital is constrained by regulation, regulatory cost (risk … weightings) alters the risk and value calculations for the bank's assets. In particular, we find that banks may respond to …

-dimensional borrower heterogeneity. Based on characterizations of securities' implicit demand for bank equity capital, we obtain closed …-form expressions for the composition of credit, including a sufficient statistic for the provision of bank loans, and a novel cross …

to the close relationship between state and bank risks. This report analyses the development of home bias—the tendency of …

how to treat sovereign exposures in bank regulation. Our contribution is to model endogenous sovereign portfolio …

Euro area governments have committed to break the doom loop between bank risk and sovereign risk. But policymakers have …