seek safety in state-owned public sector banks (PSBs). We trace the consequences of this reallocation using granular data … and credit quality improves at the run banks but worsens at the recipient PSBs. The effects are pronounced in weaker PSBs …

its response to that crisis (allowing weak banks to close) and the redoubling of regulatory efforts to promote market … discipline has played an important role in prudential regulation by encouraging proper risk management by banks. There is … substantial heterogeneity among banks in the interest rates they pay for debt and the rate of growth of their deposits, and that …

A model is developed which rationalizes contracts that give depositors the right to obtain funds on demand even when … depositors intend to use these funds for consumption in the future. This is explained by depositor overoptimism regarding their … own ability to collect funds in a run. Capitalized institutions serving depositors with such beliefs emerge in equilibrium …

depositor run. We compute similar incentives for the sample of all U.S. banks. Even if only half of uninsured depositors decide … to withdraw, almost 190 banks are at a potential risk of impairment to insured depositors, with potentially $300 billion …We analyze U.S. banks' asset exposure to a recent rise in the interest rates with implications for financial stability …

-ideal environment to identify this competitive liquidity risk during a crisis. We find that banks that operated nearby a post office … effect is strongest for those banks with low reserves, suggesting that the mechanism was through depositor withdrawals rather …

decisions of shadow banks: intermediaries that provide banking services but are not funded by deposits. We assemble, for the … first time, call report data for shadow banks which originate one quarter of all US household debt. We document five facts …. (1) Shadow banks use twice as much equity capital as equivalent banks, but are substantially more leveraged than non …

-capitalized banks. However, unlike productive capital of nonfinancial firms that typically has a positive marginal q, the deposit q can … turn negative for undercapitalized banks. Demand deposit accounts commit banks to allow holders to withdraw or deposit … funds at will, so banks cannot perfectly control leverage. Therefore, for banks with insufficient capital to buffer risk …

their deposit franchise, and in return get substantial market power. Market power allows banks to charge depositors a spread …We show that maturity transformation does not expose banks to significant interest rate risk--it actually hedges banks …' interest rate risk. We argue that this is driven by banks' deposit franchise. Banks incur large operating costs to maintain …

Motivated by the regional bank crisis of 2023, we model the impact of interest rates on the liquidity risk of banks …. Prior work shows that banks hedge the interest rate risk of their assets with their deposit franchise: when interest rates … valuable if depositors remain in the bank. This creates run incentives for uninsured depositors. We show that a run equilibrium …