Despite the growth of Islamic banks (IBs), little is known about their liquidity creation performance and financial stability consequences relative to conventional banks (CBs). We address these issues using data from 24 countries over 2000–2014. We find IBs create more liquidity per unit of...

Can macroprudential foreign exchange (FX) regulations on banks reduce the financial and macroeconomic vulnerabilities created by borrowing in foreign currency? To evaluate the effectiveness and unintended consequences of macroprudential FX regulations, we develop a parsimonious model of bank and...

Bilateral derivatives valuation is subject to counterparty credit risk (CCR) in that a counterparty could jump to default or its credit spread could vary over time. In the nomenclature of risk management, the former is called CCR exposure and the later leads to credit valuation adjustment (CVA)....

Financial regulation after the Dodd-Frank Act has produced a blizzard of acronyms, many of which revolve around the “too big to fail” (TBTF) problem. OLA, OLF, SPOE, and TLAC are new regulatory tools that seek to build a new regime for resolving failures of systemically important financial...

How do developments at lending institutions that alter the way they grant and monitor loans influence their borrowers' financial reporting quality (FRQ)? We examine this question by investigating the influence that privatizations of Chinese state banks (CSBs) had on the quality of their...

This study investigates the implications of cross-country differences in banking regulation and supervision for the international subsidiary locations and risk of U.S. bank holding companies (BHCs). We find that U.S. BHCs are more likely to operate subsidiaries in countries with weaker...

We use a large sample of non-US banks to examine the propagation of the 2007-2009 crisis. Using both stock market and structural variables we test whether the relative incidence of the crisis was better explained by crisis models or by the VaR-type analysis of the Basel system. Consistent with...

Risk management is at present essential to the banking business mainly as a discipline geared to the protection of depositors with a strong capital support. But risk management yields other benefits, offering a well-grounded procedure to allocate capital and to price banking products. Value at...

This study investigates empirically the effects that hedge funds can have on the stability of the financial system. We conclude that hedge funds are in general less risky than banks. We do not find much evidence for the fear that hedge fund failures can trigger a systemic crisis in the banking...

The Basel Committee designed a system of risk weights (quot;standardised approachquot;) to measure the riskiness of banks' loan portfolios. We investigate its ability to adequately reflect risk through an analysis of the economic capital implied in corporate bond spreads. This is based on a...