This paper examines the impact of issuing contingent convertible (CoCo) bonds on bank risk. I apply a matching-based difference-in-differences approach to banklevel data for 246 publicly traded European banks and 61 CoCo issues from 2008−2018. My estimation results reveal that issuing CoCo...

This paper considers the economic implications of supporting prime money market funds with capital buffers. The main findings are twofold. First, relatively small capital buffers are capable of absorbing daily fluctuations between a fund's shadow price and its amortized cost. The ability to...

Basel III credit-to-GDP gap indicators are used to assess whether aggregate credit is excessive or not and inform macroprudential policymaking. Yet, estimates from Basel III’s prescribed detrending procedure are prone to continuous re-evaluations that do not reflect changes in the data and...

We study the impact of cyclical systemic risks on banks' profitability in the euro area within a panel quantile regression model, with the ultimate goal to inform the calibration of the Countercyclical Capital buffer (CCyB). Compared to previous studies, we augment our model to control for...

A fundamental cause of the global financial crisis was excessive creation of short-term money-like liabilities (quasi-money), notably in shadow banking holdings of sub-prime MBS and other US dollar structured credit instruments and in cross-border flow of capital to the uncompetitive Euro area...

A fundamental cause of the global financial crisis was excessive maturity mismatch, notably shadow banking holdings of sub-prime MBS and other structured credit instruments and cross-border Euro area interbank lending to the uncompetitive Euro area periphery. The costs of short term funding do...

Under a new Basel capital accord, bank regulators might use quantitative measures when evaluating the eligibility of internal credit rating systems for the internal ratings based approach. Based on data from Deutsche Bundesbank and using a simulation approach, we find that it is possible to...

This paper examines the relationship between capital and liquidity creation. This issue is of interest to determine the potential impact of tighter capital requirements such as those involved in Basel III reforms on liquidity creation. We perform Granger-causality tests in a dynamic GMM panel...

The macroprudential regulatory framework of Basel III imposes the same capital and liquidity requirements on all banks around the world to ensure global competitiveness of banks. Using an agent-based model of the financial system, we find that this is not a robust framework to achieve...

We analyze the cyclicality of risk weights of banks in the Czech Republic from 2008 to 2016. We differentiate between risk weights under the internal ratings-based and those under the standardized approach, consider the financial cycle, and employ wavelet coherence as a means of dynamic...