The global financial crisis has provided clear evidence that the global financial system, including that of Australia, is founded on flawed economic theories. There is no scientific justification for sophisticated risk management, complex institutional structures or intrusive regulation....

In August 2007 the United Kingdom experienced its first bank run in over 140 years. Although Northern Rock was not a particularly large bank (it was at the time ranked 7th in terms of assets) it was nevertheless a significant retail bank and a substantial mortgage lender. In fact, ten years...

One explanation for the poor performance of regulation in the recent financial crisis is that regulators had been captured by the financial sector. We present a micro-founded model with rational agents in which banks may capture regulators due to their high degree of sophistication. Banks can...

In the United States and the European Union (EU), political incentives to oppose cross-border banking have been strong in spite of the measurable benefits to the real economy from breaking down geographic barriers. Even a federal-level supervisor and safety net are not by themselves sufficient...

Why do good bankers at times respond unanimously with the same disastrous strategy? Rooted in regulatory economics and behavioural finance, the paper offers a taxonomy of effects that narrow banks decision scope into funnel-shaped and thus prepared the ground for the financial crisis. The basic...

This paper develops a theoretical framework in which asset linkages in a syndicated loan agreement can infect a healthy bank when its partner bank fails. We investigate how capital constraints affect the choice of the healthy bank to takeover or liquidate the exposure held jointly with the...

The U.S. financial crisis of 2007-2008 has been a searing experience. The popping of a housing bubble exposed the subprime lending debacle, which in turn created a wider financial crisis. In its response to this crisis, the federal government has provided financial assistance to a number of...

The trade-off between bank competition and financial stability has always been a widely and controversial issue, both among policymakers and academics. This paper empirically re-investigates the relationship between competition and bank risk across a sample of 54 European listed banks over the...

This study investigates if the Troubled Asset Relief Program (TARP) distorted price competition in U.S. banking. Political indicators reveal bailout expectations after 2009, manifested as beliefs about the predicted probability of receiving equity support relative to failing during the TARP...