We develop a dynamic model of banking to assess the effects of liquidity and leverage requirements on banks' insolvency risk. In this model, banks face taxation, flotation costs of securities, and default costs and maximize shareholder value by making their financing, liquid asset holdings, and...

Following the recent global financial crisis, Vietnamese banks experienced changes in the minimum capital adequacy requirement following the Basel framework. We examine the impact of the regulatory change on market discipline between 2006 and 2015. The findings show a weakening of market...

A bank panic is an expectation-driven redemption event that results in a self-fulfilling prophecy of losses on demand deposits. From the standpoint of theory in the tradition of Diamond and Dybvig (1983) and Green and Lin (2003), it is surprisingly di¢ cult to generate bank panic equilibria if...

On 24 November 2015, the European Commission published a proposal to establish a European Deposit Insurance Scheme (EDIS). The proposal provides for the creation of a Deposit Insurance Fund (DIF) with a target size of 0.8% of covered deposits in the euro area and the progressive mutualisation of...

We analyze the benefits and costs of a non-euro country opting-in to the banking union. The decision to opt-in depends on the comparison between the assessment of the banking union attractiveness and the robustness of a national safety net. The benefits of opting-in are still only potential and...

This paper shows that the abolition of state guarantees to publicly owned banks in Germany resulted in an increase in funding costs at German savings banks. Rather than being the result of increased market discipline, the increase in funding costs is shown to be driven by spillover effects from...

Recent events have made it clear that the deposit insurance system is broken. We have a de jure cap on insurance set at $250,000 but, de facto, for any bank with at least $100 billion in assets, uninsured depositors are very unlikely to take losses. It is time for Congress to advance legislation...

We study capital regulation in a dynamic banking model with non-maturing deposits. Optimal withdrawals of depositors make bank deposits endogenously long-term. Capital regulation addresses deposit dilution but is subject to a time-inconsistency problem. Comparing the optimal policies of...

This study examines changes in market discipline in European corporate deposit markets in response to different crisis periods and regulatory initiatives in the European Union. We measure market discipline by investigating the risk sensitivity of uninsured corporate deposits, i.e. by analyzing...

Deposit insurance is one of the main pillars of banking regulation meant to safeguard financial stability. In early 2009, the EU increased the minimum deposit insurance limit from e20, 000 to e100, 000 per bank account with the goal of achieving greater stability in the financial markets. Italy...