Recent U.S. legislation (Gramm-Leach-Bliley Act) allows commercial banks to enter merchant banking, i.e. hold equity in non-financial firms. A stylised auction-theoretic model is developed to investigate the effects of bank equity stakes in firms on the competition in bank loans. The main...

Before 2007, financial crises were not widely studied in economics and finance. The lack of importance ascribed to financial stability and our limited knowledge of this topic were significant contributors to the crisis. This paper suggests five areas where new theories are needed. These are...

The increasing pace of FinTech development has triggered a worldwide race among policy makers to overhaul their own regulatory landscape in order to be as innovation-friendly as possible. Consequently, a vast array of new tools and regulatory practices have emerged over the last years. The paper...

The Community Reinvestment Act (CRA) requires banks to lend to low- and moderate-income (LMI) households in the areas where they take deposits. But it has become obsolete.We have serious reservations as to whether any regulatory agency could have the wisdom necessary to administer such a system...

We consider comprehensive data on crowdfunding in the U.S., including debt (marketplace lending), rewards, donations, and equity crowdfunding, to formally test for the first time if banks are complements or substitutes to crowdfunding. The data indicate that bank failures in a county are...

We analyze the entry of new credit rating agencies into structured finance products. Our setting is unique as we study a period in which the incumbents' reputation was extremely poor and the benefit of more fee income from inflating ratings was low. We find entrants cater to issuers by issuing...