It is known that sunspots can trigger panic-based bank runs and that the optimal banking contract can tolerate panic-based runs. The existing literature assumes that these sunspots are based on a publicly observed extrinsic randomizing device. In this paper, I extend the analysis of panic-based...

This paper focuses on the consequences of cross-border banking and entry of multi-national banks (MNBs) for banking supervision and regulation. When a MNB expands internationally with subsidiaries, the MNB operates under the legislation of several countries - both the home country and the host...

We study the Diamond-Dybvig model of financial intermediation (JPE, 1983) under the assumption that depositors have information about previous decisions. Depositors decide sequentially whether to withdraw their funds or continue holding them in the bank. If depositors observe the history of all...

This paper experimentally studies the impact of uncertainty about bank and borrower fundamentals on loan repayment. We find that solvent borrowers are more likely to default strategically when stricter disclosure creates common knowledge about bank weakness. Borrowers are also less likely to...

The gold spot price is fixed by four banks every day at 10:30 am and 3 pm London time. This document describes a role-play simulation that replicates core features of the London gold fixing with the aim to better understand the incentives and the behaviour of the fixing participants. The game is...

We propose a model with incomplete information where a distressed bank asks its creditor, a healthy bank, to reduce its debt. Given the information disclosed by the regulator about the asset quality of the distressed bank and its possible bailout by the government, the healthy bank can accept or...

Consider a competitive bank whose illiquid asset portfolio is funded by short-term debt that has to be refinanced before the asset matures. We show that in this setting maximal transparency is not socially optimal, and that the existence of social externalities of bank failures further lowers...

A common practice of banks has been to pool assets of different qualities and then sell a fraction of the newly created portfolios to investors. We extend the signaling model for single sales of risky assets to portfolio sales. We identify conditions under which signaling at the portfolio level...

There is a general consensus that the root cause of the most recent turmoil in the domestic and global markets is due to a failure in our regulatory system. Yet, Congress has not supported comprehensive regulation related to the day-to-day activities of mortgage brokers and their relationship...

We analyze a market for microfinance in a region of a developing nation in which all projects are either of high or low quality. There is adverse selection because only borrowers know whether their project is of high or low quality but the microfinance institutions (MFIs) do not. The MFIs are...