This discussion by Franklin Allen was published as an appendix to Jean Tirole's paper "Illiquidity and all its Friends" when the paper was originally published as FEEM Nota di Lavoro 78.2010, prior to its publication in the Journal of Economic Literature in 2011, where the appendix no longer...

The internal ratings-based (IRB) approach maps banks’ risk profiles more adequately than the standardized approach. After switching to IRB, banks’ risk-weighted asset (RWA) densities are thus expected to diverge, especially across countries with different supervisory strictness and risk...

Limited liability and asymmetric information between an investment bank and its lenders provide an incentive for a bank to undercapitalise and finance overly risky business projects. To counter this market failure, national governments have imposed solvency constraints on banks. However, these...

We integrate banks and the coexistence of bank and bond financing into an otherwise standard New Keynesian framework. There are two policy-makers: a central banker, who can decide on short-term nominal interest rates, and a macroprudential policy-maker, who can vary aggregate capital...

This note examines the July 2015 Basel Committee/IOSCO (operating as the Task Force on Securitisation Markets or “TFSM”) “Criteria for Identifying Simple, Transparent and Comparable Securitisations” and the supplementary November 2015 consultative document entitled “Capital Treatment...