We construct a model in which bank capital regulation and financial innovation interact. Innovation takes the form of pooling and tranching of assets and the creation of separate structures with different seniority, different risk, and different capital charges, a process that captures some...

The bailouts carried out by governments for large banks and other financial entities in the recent financial turbulence are often characterized as a Too-Big-To-Fail (TBTF) policy. Proponents of such a policy argue that preventing the failure of large banks (and possibly other financial and...

Since his appointment in the summer of 2009, the new Governor of the Central Bank of Nigeria, Lamido Sanusi, has introduced a spate of reforms in response to the global financial crisis and the mismanagement of certain Nigerian banks. This article briefly reviews the history of Nigerian banking...

New lessons, challenges, and debates have emerged from the subprime crisis in the United States. While the macroeconomic orientation is not new and has always been among the classic toolkits of central banks for ensuring financial stability, the current explicit articulation and specification of...

In the article, we describe the European Commission's (EC) recapitalisation proposals which were announced as part its road map to stability and growth on 12 October 2011. The EC is calling for ‘significantly' higher capital reserves to help banks replenish their balance sheets to withstand...

The view that central banks must play a greater role in preserving financial stability has gained considerable ground in the aftermath of the crisis and macroprudential policy has become a central pillar to deal with financial stability. The policy frame of macroprudential policy, its toolbox...

Bailout expectations have led banks to behave imprudently, holding too little capital and relying too much on short term funding to finance long term investments. This paper presents a model to rationalize a constructive ambiguity approach to liquidity assistance as a solution to forbearance....

This paper attempts to propose some salient banking reforms 3.0 for India and analyses the policies, approaches, and challenges for Indian banking in alignment with clamor for economic reforms 2.0 for India. I start with a brief history of banking regulation in India and then move on to outline...

At the heart of the eurozone crisis lies the inability of the current monetary policy framework to avert the on-going financial disintegration and to break the vicious circle that ties up banks and governments in a death grip (liquidity ring-fencing), which does not allow policies to deal...

We analyse the wide array of rescue programmes adopted in several countries, following Lehman Brothers' default in September 2008, in order to support banks and other financial institutions. We first provide an overview of the programmes, comparing their characteristics, magnitudes and...