In the wake of the global financial crisis that erupted in 2008, there has been extensive commentary and regulatory focus on the 'Too Big to Fail' issue. In this paper, we survey the proposed solutions and regulatory initiatives that have been undertaken. We conduct a longitudinal analysis of...

Given the indisputable cost of policy inaction in the run-up to banking crises as well as the negative side effects of unwarranted policy activation, policymakers would strongly benefit from earlywarning thresholds that more accurately predict crises and produce fewer false alarms. This paper...

Increases in firm default risk raise the default probability of banks while decreasing output and inflation in US data. To rationalize the empirical evidence, we analyse firm risk shocks in a New Keynesian model where entrepreneurs and banks engage in a loan contract and both are subject to...

Nous proposons une premi ere tentative pour prendre en compte les engagements hors-bilan de l' Etat li es a l'assurance implicite des banques syst emiques dans une evaluation coh erente de la soutenabilit e budg etaire, pour 27 pays de l'Union europ eenne. Nous calculons d'abord des ecarts de...

In this paper, we investigate the growing prominence of credit in the systemic banking crisis prediction literature. Through the application of the signal extraction model and multivariate probit panel regression, we evaluate the performance of the absolute change in credit-to-GDP ratio as an...

In this paper we describe systemic financial risk as a pollution issue. Free riding leads to excess risk production. This problem may be solved, at least partially, either with financial regulation or taxation. From a normative viewpoint taxation is superior in many respects. However, reality...

After the outbreak of the financial crisis in 2007-2008 the level of non-performing loans (NPLs) in the economy has generally increased. However, while in some countries this has been a transitory phenomenon, in others it still represents a major threat for economic recovery and financial...

The market-based SRISK measure introduced in Brownlees and Engle (2015) is used to measure the level of systemic risk in Danish banks for the period 2005-15. We find that SRISK was a very good predictor of which banks that needed public capital injections during the financial crisis of 2007-09....

We highlight the ex ante risk-shifting incentives faced by a bank's shareholders/managers when CoCos (contingent convertible capital) are part of the capital structure. The risk shifting incentive arises from the wealth transfers that the shareholders will receive upon the CoCo's conversion...