The basic worldwide financial safety net architecture provides for a system of similar institutions: a lender of last resort, deposit insurance, and prudential regulation. In countries whose banking systems suffer seriously from negative capital positions and overbanking, such as in some Latin...

Bank regulators have the discretion to discipline banks by executing enforcement actions to ensure that banks correct deficiencies regarding safe and sound banking principles. We highlight the trade-offs regarding the execution of enforcement actions for financial stability. Following this we...

The economic and financial crisis of the year 2008 highlighted the need for banking sector regulation via the creation of the banking union. The Bank Recovery and Resolution Directive (BRRD) represents an important milestone in the formation of the banking union. It is supposed inter alia to...

In general, banks play a growth-enhancing role for the real economy. However, distorted incentives of banks, depositors, and regulators around bank insolvency may corrupt banks' credit allocation and monitoring decisions, leading to suboptimal real economic outcomes. A rules-based prompt...