unprecedentedly during the recent financial crisis, may impose indirect costs to financial stability if bailout expectations of … participants adjusted their bailout expectations in response to government interventions, undermining market discipline mechanisms …

Business cycles imply liquidity risks for banks. This paper explores how these risks influence bank lending over the … cycle. With forward-looking banks, lending cycles, credit booms and busts, or suppressed and highly fragile bank systems can … unpleasant effects on bank lending. Imposing countercyclical capital adequacy ratio may amplify procyclicality or result in …

Theoretically, bank's loan monitoring activity hinges critically on its capitalisation. To proxy for monitoring … governance of the firm. Exploiting granular bank-firm relationships observed in the syndicated loan market, we document …

This paper analyzes the emergence of systemic risk in a network model of interconnected bank balance sheets. Given a … shock to asset values of one or several banks, systemic risk in the form of multiple bank defaults depends on the strength … of balance sheets and asset market liquidity. The price of bank assets on the secondary market is endogenous in the model …