Intro -- Contents -- I. INTRODUCTION -- II. THE BASIC MODEL SETTING -- III. MODEL 1: A SIMPLE MODEL WITH NON-RANDOM DEFAULT PROBABILITIES -- IV. INTRODUCING THE POISSON APPROXIMATION -- V. MODEL 2: THE MODEL WITH KNOWN PROBABILITIES REVISITED -- VI. MODEL 3: THE MODEL WITH RANDOM DEFAULT...

After the destructive impact of the global financial crisis of 2008, many believe that pre-crisis financial market regulation did not take the "big picture" of the system suffciently into account and, subsequently, financial supervision mainly "missed the forest for the trees". As a result, the...

While regulatory capital buffers are expected to be drawn to absorb losses and meet credit demand during crises, this paper shows that banks were unwilling to do so during the pandemic. To the contrary, banks engaged in forms of pro-cyclical behaviour to preserve capital ratios. By employing...