This paper studies the relationship between the size of the banking sector's refinancing needs vis-à-vis the central bank and auction rates in its open market operations in times of financial market stress. In a theoretical model, it is found that marginal rates at central bank auctions may...

We study the functioning and possible breakdown of the interbank market in the presence of counterparty risk. We allow banks to have private information about the risk of their assets. We show how banks' asset risk affects funding liquidity in the interbank market. Several interbank market...

This paper analyzes cooperation between sovereign national authorities in the supervision and regulation of a multinational bank. We take a political economy approach to regulation and assume that supervisors maximize the welfare of their own country. The communication between the supervisors is...

While domestic interbank markets are often considered to work in an efficient way, cross-country bank lending appears to be subject to market imperfections leading to persistent interest rate differentials. In a model where banks need to cope with liquidity shocks by borrowing or by liquidating...

The competition between a central securities depository (CSD) and a custodian bank is analysed in a Stackelberg model. The CSD sets its prices first, the custodian bank follows. There are many investor banks each of which has to decide whether to use the service of the CSD or of the custodian...

This paper studies access regulation to international large-value payment systems when banking supervision is national task. We focus on the choice between net settlement or imposing real time gross settlement. As a novel feature, the communication between the supervisors is endogenized. It is...

This paper analyses the implications of climate change for the conduct of monetary policy in the euro area. It first investigates macroeconomic and financial risks stemming from climate change and from policies aimed at climate mitigation and adaptation, as well as the regulatory and fiscal...

We develop a model of interbank lending and borrowing with counterparty risk. The model has two key ingredients. First, liquidity in the banking sector is endogenous, which means that there is an opportunity cost of holding liquid assets. Second, banks are privately informed about the risk of...

The role of money in society has been a controversial topic in economic theory over many years. Particular attention has been devoted to the analysis whether there should be competition in the supply of money, or whether this is best left to a governmental agency. This paper reviews the...