level of bank capital is. We use empirical evidence on UK banks to assess costs; we use data from shocks to incomes from a …This paper reports estimates of the long-run costs and benefits of banks funding more of their assets with loss … of the benefits from having banks use more equity no estimate of costs--however accurate--can tell us what the optimal …

We develop a dynamic model to assess the effects of liquidity and leverage requirements on banks' insolvency risk. The … model features endogenous capital structure, liquid asset holdings, payout, and default decisions. In the model, banks face … short-run; leverage requirements reduce default risk but may significantly reduce bank value; mispriced deposit insurance …

In this paper, we examine the relationship between banks’ approval for the internal ratings-based (IRB) approaches of … Basel II and the ratio of risk-weighted over total assets. Analysing a panel of 115 banks from 21 OECD countries that were …-weight manipulation, we find the decline in risk-weights to be particularly prevalent among weakly capitalised banks, when the legal …

We study the effects of a bank’s engagement in trading. Traditional banking is relationship-based: not scalable, long …-based: scalable, short-term, capital constrained, and with the ability to generate risk from concentrated positions. When a bank … inefficiencies. A bank may allocate too much capital to trading ex-post, compromising the incentives to build relationships ex …

competitive environment affect bank monitoring choices and the effectiveness of capital regulation? Our approach deviates from the … extant literature in that it recognizes the fixed costs associated with banks’ monitoring technologies. These costs make … market share and scale important for the banks’ cost structures. Our most striking result is that increasing (costly) capital …

We examine the interdependency between loan officer compensation contracts and commercial bank internal reporting … systems (IRSs). The optimal incentive contract for bank loan officers may require the bank headquarters to commit not to act … information flow within the bank. We show that origination fees for loan officers emerge naturally as part of the optimal contract …

The paper studies risk mitigation associated with capital regulation, in a context where banks may choose tail risk … liability. Moreover, higher capital may have an unintended e¤ect of enabling banks to take more tail risk without the fear of … pre-crisis bank behavior, and suggest implications for the optimal design of capital regulation. …

We investigate the optimal regulation of financial conglomerates that combine a bank and a non-bank financial … not only of the present debate on the regulation of financial conglomerates but also in the light of existing US bank …

methodology to separate firm credit shocks from loan supply shocks using a vast sample of matched bank-firm lending data. We … decompose loan movements in Japan for the period 1990 to 2010 into bank, firm, industry, and common shocks. The high degree of … financial institution concentration means that individual banks are large relative to the size of the economy, which creates a …

rigorous models of bank and payment system contagion have now been developed, although a general theoretical paradigm is still … missing. Direct econometric tests of bank contagion effects seem to be mainly limited to the United States. Empirical studies …