The Basel III Accord imposes minimum liquidity standards on bank balance sheets that are already constrained by minimum capital standards. It is not clear whether or how banks' behaviors will change in this new joint-constraint regime. To gain some insight, we study the balance sheet liquidity...

We study a novel mechanism through which systemic risk, in the form of self-fulfilling runs, forces the banks to hoard liquidity. To this end, we develop an environment where banks offer insurance to their depositors against both idiosyncratic and aggregate real uncertainty, by holding a...

We study how monetary policy affects the funding composition of the banking sector. When monetary tightening reduces the supply of retail deposits, banks attempt to substitute wholesale funding for deposit outflows to smooth their lending. Due to financial frictions, banks have varying degrees...

The introduction of bail-in resolution powers to impose the costs of a large bank's failure on its creditors (rather than on the taxpayer) is the most intriguing initiative of the post-financial crisis regulatory framework. However, a fundamental conundrum remains in the legal regime: it is...

This research examines whether social capital at the county level in the U.S., as captured by the strength of civic norms and density of social networks, affects the liquidity holdings and failure risk of banks headquartered in the counties. Findings here indicate that banks headquartered in...

We analyze how the inflow of liquidity through TARP funds in the wake of the 2007/2008 financial crisis impacted banks' interbank market activity. We show that TARP banks increased interbank market activity statistically and economically in a very significant way. Their interbank lending...

There is substantial evidence that new banks and rapidly growing banks are risk prone.We study this problem by designing a relationship-lending model in which a bank operates as a financial intermediary and centralised monitor.In the absence of deposit insurance, the bank s limited liability...

This paper investigates the relationship between credit risk and liquidity risk, based on the potential interdependence between liquid asset ratio and non-performing loans ratio, as well as systemic liquidity risk. The data used cover the period 2007–2012 and the country of study is Greece. We...