joint implementation of a capital and a liquidity regulation … liability side. The endogenously determined asset portfolio and capital structure interact to support credit extension, as well … as to provide liquidity and risk-sharing services to the real economy. Our modifications create wedges in the asset and …

tightened following announcements related to easier bank capital regulation while equity valuation rose and financial conditions … loosened after those about liquidity regulation. Effects from non-regulatory financial measures appear to be generally more …