This paper addresses the desirability of competition in banking industry. In a model where banks compete on both … three questions: what are the effects of competition on banks' monitoring incentives? Does competition hurt banks' stability …? What can be devices to correct potential negative effects of competition vis à vis financial stability? We find that …

We present a simple model to study the risk sensitivity of capital regulation. A banker funds investment with uninsured … banks attract cheaper deposit funding and require less capital. With a noisy signal, risk-sensitive capital regulation can …

because it reflects special liquidity benefits of bank debt. Even aside from neglecting the systemic damage to the economy … benefits. Contrary to claims in the literature that “equity is expensive” and that regulation requiring more equity in the … funding mix entails costs to society, such regulation actually helps create useful commitment for banks to avoid the …

it reflects special liquidity benefits of bank debt. Even aside from neglecting the systemic damage to the economy that …. Contrary to claims in the literature that "equity is expensive" and that regulation requiring more equity in the funding mix … entails costs to society, such regulation actually helps create useful commitment for banks to avoid the inefficiently high …

The European Central Bank, as a supervisory authority, set additional to the European level one capital requirements …

-out guarantee. The reason is that the prospect of a bail-out induces the rotected bank to expand, thereby intensifying competition … in the deposit market and depressing other banks' margins. In contrast, the effects on the protected bank's risk taking …

We study lottery behavior in banking stocks and use MAX/MIN to capture loss protection from bank bailout guarantees. We … find that bank lottery preferences lead to lower short-term returns and that regulatory TARP assistance increases the … likelihood of bank lotteryness and risk taking. Lottery-type bank equities are riskier after TARP and exhibit fatter right to …

We analyze the relationship between bank size and risk-taking under the New Basel Capital Accord. Using a model with … imperfect competition and moral hazard, we show that the introduction of an internal ratings based (IRB) approach improves upon … a competitive advantage and, due to fiercer competition, pushes smaller banks to take higher risks. This may even lead …

trends. When shocks hit their pro ts, banks tend to adjust retained earnings to smooth dividends. This generates bank equity … existing capital regulation by tackling this issue. Welfare-maximizing DPTs are effective (more than the CCyB) in smoothing the … a Basel III-type of capital regulation through various channels. …

This paper examines the welfare implications of bank capital requirements in a general equilibrium model in which a … regulation can address these distortions and has a first-order effect on both growth and welfare. In the model, the optimal level … of minimum Tier 1 capital requirement is 8%, greater than that prescribed by both Basel II and III. Increasing bank …