This paper studies the relation between bank herding and financial system stability. I develop a set of bank … relation between bank herding and systemic risk contribution. I find that for large banks, asset herding is associated with … between bank herding and systemic risk contribution …

tie these features together in a model of banks' herding behavior. Most existing models of herding behavior can explain … the other hand, many models that try to explain excessive risk-taking do not contain any incentive for herding. This paper … develops astate-preference model of simultaneous herding and excessive risktaking. Thus, the model can help in understanding …

, rigid bank regulations, stakeholder-focused incentive structures within banks and uncritical adoption of innovations may …

. Finding such arguments is more difficult for a bad bank, which the regulator wants to regulate more strictly. However, the … more sophisticated a bank is, the more easily it can produce an argument that a regulator may not understand. Career … levels of regulation. Bank sophistication leads to capture, and thus to worse regulatory decisions. …