We examine the effects of opacity on bank valuation and the synchronicity of bank equity prices over the years 2000-2006 prior to the 2007 financial crisis. Investments in opaque assets are more profitable than transparent assets, and controlling for profitability, have larger valuation...

The objectives of this paper are, first, to analyze whether banks' risk-taking can be explained by factors contributing to implicit guarantees and by factors associated with banks' business models. Second, it analyzes how risk-taking associated with these factors has changed from a period before...

Stylized data shows a structural break in the integration of lending markets which coincides with the global financial crisis. During and after the crisis, banks actively reduced their share of foreign relative to domestic banking activity and lending in particular. This increase in lending...

We analyze link between mortgage-related regulatory penalties levied on banks and the level of systemic risk in the U.S. banking industry. We employ a frequency decomposition of volatility spillovers to draw conclusions about system-wide risk transmission with short-, medium-, and long-term...

We study the interaction between a government's bailout policy and banks' willingness to impose losses on (or \bail in") their investors. The government has limited commitment and may choose to bail out banks facing large losses. The anticipation of this bailout undermines a bank's private...

I develop a model where the sovereign debt capacity depends on the capitalization of domestic banks. Low-capital banks optimally tilt their government bond portfolio toward domestic securities, linking their destiny to that of the sovereign. If the sovereign risk is sufficiently high,...

Post-crisis reforms aim to mitigate the systemic risks that arise from global systemically important banks (G-SIBs). Based on our estimates of G-SIBs' probability of distress, we find that their resilience has improved in recent years on the back of higher capital ratios. Furthermore, by...

Intervention has taken different forms in different countries and periods of time. Moreover, the high interconnection of financial institutions makes the (implicitly or explicitly) promise of no intervention made by governments barely credible. Moreover, it is largely claimed that these...

This essay examines how securitization served as a new coupling rod joining cycles in real estate and banking markets and created a new pathway for financial contagion in the “subprime” financial crisis. Legal changes promoted the growth of securitization and improved this crisis...