regulatory requirements. Our analytic characterization of the bank policy choices shows that imposing solely liquidity … requirements leads to lower bank losses in default at the cost of an increased likelihood of default. Combining liquidity … requirements with leverage requirements reduces drastically both the likelihood of default and the magnitude of bank losses in …

This working paper was written by Simon H. Kwan (Federal Reserve Bank of San Francisco).This paper examines the impact … that IRRs deregulation would benefit, rather than hurt, bank earnings. Furthermore, large banks and banks with high growth …