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Too Many to Fail - An Analysis of Time Inconsistency in Bank Closure Policies

Acharya, Viral V; Yorulmazer, Tanju - C.E.P.R. Discussion Papers - 2004

systemic risk, the risk that many banks may fail together. The ex-post optimal regulation may thus be sub-optimal from an ex …-ante standpoint. We formalize this time-inconsistency of bank regulation. We also argue that by allowing banks to purchase failed …

Persistent link: https://www.econbiz.de/10005136753

Complementing Bagehot: Illiquidity and insolvency resolution

Eijffinger, Sylvester C W; Nijskens, Rob - C.E.P.R. Discussion Papers - 2011

During the recent financial crisis, central banks have provided liquidity and governments have set up rescue programmes to restore confidence and stability, often against the LLR principle advocated by Bagehot. Using a model of a systemic bank suffering from liquidity shocks, we find that the...

Persistent link: https://www.econbiz.de/10009320403

The lender of last resort: liquidity provision versus the possibility of bail-out

Eijffinger, Sylvester C W; Nijskens, Rob - C.E.P.R. Discussion Papers - 2010

Banking regulation has proven to be inadequate to guard systemic stability in the recent financial crisis. Central … authority faces a trade-off: when it imposes strict bailout conditions, investment increases but moral hazard ensues. Milder … bailout conditions reduce excessive risk taking at the expense of investment. This resembles the current situation on …

Persistent link: https://www.econbiz.de/10008468710

Efficient Recapitalization

Philippon, Thomas; Schnabl, Philipp - C.E.P.R. Discussion Papers - 2009

We analyze public interventions to alleviate debt overhang among private firms when the government has limited information and limited resources. We compare the efficiency of buying equity, purchasing existing assets, and providing debt guarantees. With symmetric information, all the...

Persistent link: https://www.econbiz.de/10008577813

Optimal Interventions in Markets with Adverse Selection

Philippon, Thomas; Skreta, Vasiliki - C.E.P.R. Discussion Papers - 2010

We study interventions to restore efficient lending and investment when financial markets fail because of adverse selection. We solve a design problem where the decision to participate in a program offered by the government can be a signal for private information. We charac terize optimal...

Persistent link: https://www.econbiz.de/10008468692

Accounting discretion of banks during a financial crisis

Huizinga, Harry; Laeven, Luc - C.E.P.R. Discussion Papers - 2009

This paper presents evidence of banks using accounting discretion to overstate the value of distressed assets. In particular, we show that the stock market applies far greater discounts to a bank’s real estate loans and mortgage-backed securities than are implicit in the book values of these...

Persistent link: https://www.econbiz.de/10004973976

Information Management in Banking Crises

Shapiro, Joel; Skeie, David - C.E.P.R. Discussion Papers - 2013

A regulator resolving a bank faces two audiences: depositors, who may run if they believe the regulator will not provide capital, and banks, which may take excess risk if they believe the regulator will provide capital. When the regulator's cost of injecting capital is private information, it...

Persistent link: https://www.econbiz.de/10011084160

Regulatory Reform After the Crisis: Opportunities and Pitfalls

Beck, Thorsten - C.E.P.R. Discussion Papers - 2010

The recent crisis has led to a thriving academic and policy debate on the future regulation of financial institutions … market-restricting approach to regulation; it would imply price-based capital and liquidity regulation, rather than …

Persistent link: https://www.econbiz.de/10008468512

Multinational Banking in Europe: Financial Stability and Regulatory Implications Lessons from the Financial Crisis

Barba Navaretti, Giorgio; Calzolari, Giacomo; Levi, Micol; … - C.E.P.R. Discussion Papers - 2010

This paper examines whether multinational banks have a stabilising or a destabilising role during times of financial distress. With a focus on Europe, it looks at how these banks’ foreign affiliates have been faring during the recent financial crisis. It finds that retail and corporate lending...

Persistent link: https://www.econbiz.de/10008468703

Caught between Scylla and Charybdis? Regulating bank leverage when there is rent-seeking and risk-shifting

Acharya, Viral V; Mehran, Hamid; Thakor, Anjan - C.E.P.R. Discussion Papers - 2012

this also compromises market discipline by making bank debt too safe. Optimal capital regulation requires that a part of …

Persistent link: https://www.econbiz.de/10011084299