banks' balance sheets; banks respond by selling assets and reducing credit provision. A highly leveraged banking sector …

credit supply conditions. When applied to a stress test of the euro area banking system, the model reveals higher system …

banks' financial distortions, which in turn increase with banks' credit risk. Higher capital requirements dampen the current … supply of banks' credit, but mitigate banks' future financial distortions. Capital requirements should be raised in response … to both an expansion of banks' credit supply and an increase in the expected future credit risk of banks. They should be …

When banks are confronted with systemic crises, some banks reduce the credit risk in their loan portfolios, whereas … others exploit potential government bailouts and increase their internal credit risk in their loan portfolios. Using a … innovators most aggressively reduce within-bank credit risk during financial crises, whereas liability innovators respond by …