This paper estimates the effect of deposit insurance on the risk-taking behaviour of banks. As shown in the theoretical literature, deposit insurance may induce moral hazard and incentivise banks to take on more risk. In this paper we provide an experimental setup in which we exploit an increase...

Using evidence from Russia, we explore the effect of the introduction of deposit insurance on bank risk. Drawing on variation in the ratio of firm deposits to total household and firm deposits before the announcement of deposit insurance, so as to capture the magnitude of the decrease in market...

Depositor preference and collateralization of borrowing may reduce the cost of settling the conflicts among creditors that arises in case of resolution or bankruptcy. This net benefit, which may be capitalized into the value of the bank rather than affect creditors' expected returns, should...

Rather than taking on more risk, US insurers hit hard by the crisis pulled back from risk taking, relative to insurers hit less hard by the crisis. Capital requirements alone do not explain this risk reduction: insurers hit hard reduced risk within assets with identical regulatory treatment....

Short-term debt is commonly used to fund illiquid assets. A conventional view asserts that such arrangements are run-prone in part because redemptions must be processed on a first-come, first-served basis. This sequential service protocol, however, appears absent in the wholesale banking...

This paper empirically investigates the effect of government bail-out policies on banks outside the safety net. We construct a measure of bail-out perceptions by using rating information. From there, we construct the market shares of insured competitor banks for any given bank, and analyze the...

Short-term debt is commonly used to fund illiquid assets. A conventional view asserts that such arrangements are run-prone in part because redemptions must be processed on a first-come, first-served basis. This sequential service protocol, however, appears absent in the wholesale banking...

Our concern in this article is two-fold: first to see whether the determinants of bank distress and failure have been any different in the GFC from previous years: second to see whether simple measures of capital adequacy outperform their risk-weighted counterparts as predictors, despite the...

This study first investigates why only some banks use the internal models (IMs) introduced by Basel II that lead to more risk-sensitive capital ratios than standardized approaches (SA). I predict that banks opt for an IM if it allows economizing on capital requirements, given their underlying...

Capital regulation requires banks to hold a prescribed amount of equity relative to their risk-weighted assets. Beyond these minimum requirements, banks usually hold additional capital. In this paper, we argue that a part of this capital buffer represents banks' response to regulatory risk...