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problem of "excessive risk" by the banks is to directly look into the banks' liabilities that are prone to a bank run and … or any other type of asset that can cause a bank run then it will have to back up 100% of its liabilities with short term …
Persistent link: https://www.econbiz.de/10013060614
This paper discusses liquidity regulation when short-term funding enables credit growth but generates negative systemic risk externalities. It focuses on the relativemerit of price versus quantity rules, showing how they target different incentives for risk creation.When banks differ in credit...
Persistent link: https://www.econbiz.de/10011383222
Credit institutions are to an increasing extent using Contingent Convertible Bonds (CoCos) to meet part of their capital requirements, which could suggest that the market for CoCos contains useful information on the robustness of the issuer. This paper gives a thorough introduction to CoCos -...
Persistent link: https://www.econbiz.de/10011761303
As a form of negative externality, a natural economic response to systemic risk is to look to taxation to correct it. However, we argue in this paper that the problem of systemic risk is not a standard externality problem. First, a 'polluter pays' approach is inapplicable because the polluter is...
Persistent link: https://www.econbiz.de/10013036133
only by bank-specific and macro-specific variables; but also by financial liberalization and banking regulations and …
Persistent link: https://www.econbiz.de/10011308529
Traditional theory suggests that higher bank profitability (or franchise value) dissuades bank risk-taking. We … highlight an opposite effect: higher profitability loosens bank borrowing constraints. This enables profitable banks to take … risk on a larger scale, inducing risk-taking. This effect is more pronounced when bank leverage constraints are looser, or …
Persistent link: https://www.econbiz.de/10012020122
We evaluate the effects of post-crisis liquidity regulation on the U.S. banking system. We find that regulated banks have substantially improved their liquidity ratios by holding more liquidity buffers and terming out their liabilities. However, some liquidity transformation has migrated to...
Persistent link: https://www.econbiz.de/10012848997
frequency of interventions coincides with greater zombie bank presence, and increases in competition are larger when zombie …
Persistent link: https://www.econbiz.de/10013044816
bank issues covered bonds backed by a pool of assets that is bankruptcy remote and replenished following losses …. Encumbering assets allows a bank to raise cheap secured debt and expand profitable investment, but it also concentrates risk on …
Persistent link: https://www.econbiz.de/10011451099
We present a simple model to study the risk sensitivity of capital regulation. A banker funds investment with uninsured deposits and costly capital, where capital resolves a moral hazard problem in the banker's choice of risk. Investors are uninformed about investment quality, but a regulator...
Persistent link: https://www.econbiz.de/10011903813