When the monetary policy rate increases, banks increase loan rates fairly quickly and by roughly the same amount. However, when the policy rate falls, bank loan rates adjust more slowly and not completely. I develop a model with which I show that this asymmetry in interest rate pass-through can...

Misreporting of borrowing rates by large banks and the resulting manipulation of LIBOR (London Interbank Offered Rate) has been the subject of headlines news recently. Confronted with charges from regulators several banks, such as Barclays, UBS, and Royal Bank of Scotland (RBS), have paid huge...

The aim of this paper is twofold: first, to study the determinants of banks’ net interest margin with a particular focus on the role of maturity transformation, using a new measure of maturity mismatch; second, to analyse the implications for banks of the relaxation of a binding prudential...

During the financial crisis numerous European governments decided to rescue domestic banks with public funds to prevent a collapse of the banking system. To internalize the public costs, bank levies have been introduced in many countries. This paper analyzes the German bank levy which was...

How do near-zero interest rates affect bank competition, risk taking and regulation? I study these questions in a tractable dynamic general equilibrium model, in which forward-looking banks compete imperfectly for deposit funding, and deposit insurance may induce excessive risk taking. The zero...

On 5-6 September 2012 SUERF held its 30th Colloquium "States, Banks, and the Financing of the Economy" at the University of Zürich, Switzerland. The papers included in this SUERF Study are based on contributions to the Colloquium. All the chapters in this publication discuss from different...

We present a network model of the interbank market in which optimizing risk averse banks lend to each other and invest in non-liquid assets. Market clearing takes place through a tâtonnement process which yields the equilibrium price, while traded quantities are determined by means of a...

How do near-zero interest rates affect optimal bank capital regulation and risk-taking? I study this question in a dynamic model, in which forward-looking banks compete imperfectly for deposit funding, but households do not accept negative deposit rates. When deposit rates are constrained by the...

How do near-zero deposit rates affect (optimal) bank capital regulation and risk taking? I study these questions in a tractable, dynamic equilibrium model, in which forward-looking banks compete imperfectly for deposit funding, subject to a (zero) lower bound constraint on deposit rates (ZLB)....