side of the model. The calibrated model possesses multiple equilibria with bank-run features, suggesting that banks can be … very fragile. We use our model to analyze proposed bank regulations. For example, our results suggest that a capital …

characteristics to those rescued (peers), especially if the rescue packages do not contain restrictions on bank activities …. Specifically, after a bank is rescued, peers show greater Non-Performing Loans ratios and lower margins. We also investigate the … public rescue packages in smoothing peers’ risk-taking incentives and avoiding distortions in the competition …