Using quarterly financial statements and stock market data from 1982 to 2010 for the six largest Canadian chartered banks, this paper documents positive co-movement between Canadian banks' capital buffer and business cycles. The adoption of Basel Accords and the balance sheet leverage cap...

To shed light on various proposals found in most modern agendum for deposit insurance (DI) reform, using contingent claims analysis, we derive closed forms formulas to value coinsurance contarcts and a private-public partnership. We then comapre the merits of these DI arrangements between...

During the subprime crisis, the FDIC has shown, once again, laxity in resolving and closing insolvent institutions. Ronn and Verma (1986) call the tolerance level below which a bank closure is triggered the regulatory policy parameter. We derive a model in which we make this parameter stochastic...

The Basel III framework comes with the requirement of a minimum leverage ratio acting as a backstop to the existing Basel II risk-based capital ratio. Given that Canada and the US have adopted similar double capital rules prior to Basel III, we study the implications of these two rules on bank...

We study the interrelationship between the Basel III countercyclical capital buffer (CCyB) and the liquidity coverage ratio (LCR) requirement. We show that LCR comes with a risk-liquidity trade-off nonexistent in Basel II. Banks trade-off the advantage of a safe asset in terms of its weight...