channel, one bank's capital policy affects the equity value and risk of default of other banks. In a model where such … externalities are strong, bank capital takes on the attribute of a public good, where the private equilibrium features excessive … implications of the model with observed bank behavior during the crisis of 2007-09 …

perquisites that yield private benefits). The privately optimal level of bank leverage is neither too low nor too high: It … substitution induced at high levels of leverage. However, when correlated bank failures can impose significant social costs …, governments may have no option but to bail out bank creditors. Anticipation of this generates an equilibrium featuring systemic …

We develop a theory of optimal bank leverage in which the benefit of debt in inducing loan monitoring is balanced … against the benefit of equity in attenuating risk-shifting. However, faced with socially-costly correlated bank failures …

We develop a theory of optimal bank leverage in which the benefit of debt in inducing loan monitoring is balanced … against the benefit of equity in attenuating risk-shifting. However, faced with socially-costly correlated bank failures …

bank's financing structure. In our model the bank's assets consist of illiquid loans and liquid reserves and are financed … to an exogenous rollover risk. We show that the use of repos inflicts two types of indirect (“shadow”) costs on the bank …'s shareholders: first, it induces the bank to maintain higher liquid reserves in order to alleviate the additional default risk …

We review the recent academic and policy literature on bank loan loss provisioning (LLP) to identify several advances … smoothing, methodological issues in the bank loan loss provisions literature and the dynamic loan loss provisioning experiment …

provisions estimate of banks. While bank credit risk teams are sometimes mesmerised by the short-term benefits of provisions … games, they do not care if their behaviour destroys bank value and the informativeness of loan loss provisioning estimates …. While it is not difficult for bank managers and analysts to understand that the provisioning process is subject to gaming …