We study how optimal bank capital and bond risk are influenced by deposit insurance, implicit guarantees, depositor … optimal amount of bank capital. The net effect on bond debt risk and valuation is small, while the effects on shareholder … preference, asset encumbrance, and bail-in resolution frameworks. We find that these features of bank financing change the …

Bank capital, and a bank's liquidity position, are concepts that are central to understanding what banks do, the risks … that can absorb losses that could otherwise threaten a bank's solvency. Meanwhile, liquidity problems arise due to … interactions between funding and the asset side of the balance sheet — when a bank does not hold sufficient cash (or assets that …