The predecessor paper to this publication, “Volcker/Vickers Hybrid”: The Liikanen Report and Justifications For Ring Fencing and Separate Legal Entities, considered the merits, objectives and cost-benefit attributes of respective models associated with the Vickers Report, Liikanen Report and...

We develop a new framework to study the implementation of monetary policy through the banking system. Banks finance illiquid loans by issuing deposits. Deposit transfers across banks must be settled using central bank reserves. Transfers are random and therefore create liquidity risk, which in...

This study employs both contingent and non-contingent claim models to test for the existence of market discipline hypothesis for derivative contracts in U.S. banking industry. In addition to the Capital Asset Pricing Model (CAPM) measure of systematic risk and standard deviation of a bank’s...

This paper presents the findings of a survey of UK banks and building societies undertaken to understand management’s reasons behind their decisions about capital. The survey shows that: (a) firms use different approaches to form their views about “desired” capital; (b) the main factors...

Purpose – This paper aims to investigate the interaction between capital requirements and pricing constraints as measures for insurance regulation. Design/methodology/approach – In a theoretical model framework, the author derives the insurer’s shareholder-value-maximizing response to...

Purpose The purpose of this paper is to study how the discretization interval affects the solvency measurement of a property-liability insurance company. Design/methodology/approach Starting with a basic solvency model, the authors study the impact of the discretization interval on risk...