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Bank capital regulation with an opportunistic rating agency
Efing, Matthias - 2013 - First draft: May, 2012, This version: May 16, 2013
This paper models the strategic interaction between a rating agency, a bank and a bank regulator who lacks information about bank asset risk. The regulator can either (1) make bank capital requirements contingent on credit ratings; or (2) set rating-independent capital requirements. Truthful...
Persistent link: https://www.econbiz.de/10009753006
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Capital requirements, market structure, and heterogeneous banks
Müller, Carola - Leibniz-Institut für Wirtschaftsforschung Halle - 2022
Bank regulators interfere with the efficient allocation of resources for the sake of financial stability. Based on this trade-off, I compare how different capital requirements affect default probabilities and the allocation of market shares across heterogeneous banks. In the model, banks‘...
Persistent link: https://www.econbiz.de/10013198370
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Equity versus bail-in debt in banking : an agency perspective
Mendicino, Caterina; Nikolov, Kalin; Suárez, Javier - 2017
We examine the optimal size and composition of banks' total loss absorbing capacity (TLAC). Optimal size is driven by the trade-off between providing liquidity services through deposits and minimizing deadweight default costs. Optimal composition (equity vs. bail-in debt) is driven by the...
Persistent link: https://www.econbiz.de/10011978192
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Climate change and the macroeconomics of bank capital regulation
Giovanardi, Francesco; Kaldorf, Matthias - 2024
This paper proposes a quantitative multi-sector DSGE model with bank failure and firm default to study the interactions between bank regulation and climate policy. Households value the liquidity of deposits, which are protected by deposit insurance. Banks collect deposits and issue equity to...
Persistent link: https://www.econbiz.de/10014548624
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Debt overhang and capital regulation
Admati, Anat R.; DeMarzo, Peter M.; Hellwig, Martin; … - 2012
We analyze shareholders' incentives to change the leverage of a firm that has already borrowed substantially. As a result of debt overhang, shareholders have incentives to resist reductions in leverage that make the remaining debt safer. This resistance is present even without any government...
Persistent link: https://www.econbiz.de/10009528814
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Fire sale bank recapitalizations
Bertsch, Christoph; Mariathasan, Mike - 2015
We develop a general equilibrium model of banks' capital structure, featuring heterogeneous portfolio risk and an imperfectly elastic supply of bank equity stemming from financial market segmentation. In our model, equity is costly and serves as a buffer against insolvency. Banks are ex-ante...
Persistent link: https://www.econbiz.de/10011341895
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Banking capital and risk-taking adjustment under capital regulation : the role of financial freedom, concentration and governance control
Lin, Shu Ling; Hwang, Da-yeh; Wang, Keh Luh; Xie, Zhe Wen - In: International journal of management, economics and … 2 (2013) 2, pp. 99-128
theory. In addition, for banks with low capital adequacy ratio, capital and risk adjustment are negatively correlated. This … applies to the verification of bankruptcy cost avoidance theory and managerial risk aversion theory. Finally, banks with lower …, which are consistent after the financial tsunami. This applies to the verification of the capital buffer theory. In addition …
Persistent link: https://www.econbiz.de/10009753457
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Regulatory arbitrage and the efficiency of banking regulation
Boyer, Pierre C.; Kempf, Hubert - 2016
We study the efficiency of banking regulation under financial integration. Banks freely choose the jurisdiction where to locate their activities and have private information about their efficiency level. Regulators non-cooperatively offer any regulatory contract that satisfies information and...
Persistent link: https://www.econbiz.de/10011458020
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The limits of model-based regulation
Behne, Markus Wilhelm; Haselmann, Rainer; Vig, Vikrant - 2014
In this paper, we investigate how the introduction of complex, model-based capital regulation affected credit risk of financial institutions. Model-based regulation was meant to enhance the stability of the financial sector by making capital charges more sensitive to risk. Exploiting the...
Persistent link: https://www.econbiz.de/10010403970
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Discussion of "Systemic Risk and the Solvency-Liquidity Nexus of Banks"
Adrian, Tobias - 2015
Pierret (2015) presents empirical analysis of the solvency-liquidity nexus for the banking system, documenting that a shock to the level of banks' solvency risk is followed by lower short-term debt. Conversely, higher short-term debt Granger-causes higher solvency risk. These results point...
Persistent link: https://www.econbiz.de/10010502655