liquidity and solvency shocks. Extending the work by Cao & Illing (2009a, b), it is shown that systemic liquidity shortage … extra cost for banking regulation and makes some schemes that are optimal under pure illiquidity risks (such as liquidity …

questions, I study a Diamond-Dybvig environment, where banks hedge against aggregate liquidity risk in the interbank market or …How does the availability of alternative investment opportunities for banks' depositors affect the reaction of the … banking system to aggregate liquidity shocks? And what are the implications, if any, for banking regulation? To answer these …

suggests that the chief negative externalities are associated with credit losses and losses due to liquidity problems, and …

gradual relaxation of banks’ lending standards – in particular an excessive reliance on rising real estate values. We document … approaches in which banks restructure NPLs on a case-by-case basis to more centralised options, such as a “London approach”, bad … banks, or asset management companies. Centralised options may be called for if case-by-case debt restructuring is suboptimal …

make discharge more likely for debtors with income above the state median. …

In general, banks play a growth-enhancing role for the real economy. However, distorted incentives for banks …, depositors, and regulators in connection with bank insolvency may corrupt banks' credit allocation and monitoring decisions …, leading to suboptimal real economic outcomes. A rules-based prompt resolution regime for insolvent banks may reestablish the …