-performing loans (NPLs) on bank cost of capital, credit and liquidity creation in the Eurozone. Empirical results confirm the model …-term. Moreover, the increased cost of capital reduces credit and liquidity creation, and the more so the less capitalized is the bank …

liquidity and solvency shocks. Extending the work by Cao & Illing (2009a, b), it is shown that systemic liquidity shortage … extra cost for banking regulation and makes some schemes that are optimal under pure illiquidity risks (such as liquidity …

shock. Our contagion mechanism operates through a dual channel of liquidity and solvency risk. The joint modelling of banks …

This paper discusses liquidity regulation when short-term funding enables credit growth but generates negative systemic … containing risk and preserving credit quality, while quantity-based funding ratios are distorsionary. Liquidity buffers are … overconfidence), excess credit and liquidity risk are best controlled with net funding ratios. Taxes on short-term funding emerge …

. Funding liquidity risk is introduced by allowing for rating downgrades and incorporating a simple framework in which concerns …

We study liquidity and systemic risk in high-value payment systems. Flows in high-value systems are characterized by … comparative statics analyses on changes to the environment. We find that banks attempting to conserve liquidity cause an increase …

Traditionally, aggregate liquidity shocks are modelled as exogenous events. Extending our previous work (Cao & Illing …, 2008), this paper analyses the adequate policy response to endogenous systemic liquidity risk. We analyse the feedback … between lender of last resort policy and incentives of private banks, determining the aggregate amount of liquidity available …