This paper shows that stable net-interest margins of banks are uninformative about banks' interest rate exposure. We show that neither deposits nor market power are essential for achieving stable net-interest margins (NIM) in long-short fixed income portfolios. We show that matching interest...

This paper develops a dynamic general equilibrium model to quantify the effects of bank capital requirements. Households' preferences for liquid assets imply a liquidity premium on deposits. The banking sector supplies deposits and has excessive risk-taking incentives. I show that the scarcity...

This paper presents a quantitative dynamic general equilibrium model for the purpose of determining the optimal capital requirement for banks. Banks contribute to the production of a final good and they provide liquidity in the form of bank debt, which households value. Banks also benefit from...