Regulators and managers in the banking sector prioritize the banking system's stability and safety to limit risks …, shocks, and potential losses. This study reveals why a bank is more or less stable via bank capital, liquidity creation, and … asset diversification. We form a structural model in which bank capital affects stability through liquidity creation, and …

as an indicator of the liquidity management adequacy in the banking system. I also suggest an extreme value theory … liquidity constraints that are currently ignored by RAROC and EVA models. While the economic profit accounts for the opportunity … cost of risky assets, what may even incorporate a market liquidity premium, it neglects the risk of failure due to the lack …