How damaging is competition between bank regulators? This paper develops a model in which both banks' risk profile and their access to wholesale funding are endogenous. Regulators weigh not only welfare, but also the number of banks under their supervision. Simulations indicate that the gains...

In two-sided markets, one widely observes skewed pricing strategies, in which the price mark-up is much higher on one side of the market than the other. Using a simple model of two-sided markets, we show that, under constant elasticity of demand, skewed pricing is indeed pro?t maximizing. The...

This paper investigates the determinants of commercial banks' own internal capital targets and potential sensitivity of these levels to the business cycle . World-wide results make clear that banks' own risk is only slightly dependent on the business cycle. Banks tend to hold substantial capital...

The model of Stiglitz and Weiss ( American Economic Review , 1981, 71(3)) is the seminal analytical work on credit rationing. However, in a recent paper, Arnold and Riley ( American Economic Review , 2009, 99(5)) claim that the distributional assumption on which that model.s main result depends...

This paper analyzes the trade-off between financial stability and credit rationing that arises when increasing capital requirements. It extends the Stiglitz-Weiss model of credit rationing to allow for bank default. Bank capital structure then matters for lending incentives. With default and...

To what extent was the credit contraction during the global financial crisis due to more intense screening and monitoring by banks? We address this question by analyzing changes in the structure of a large number of syndicated loans to private, non-financial corporations. We find an increase in...

This paper estimates the relation between bank profitability and economic downturns using a theoretical model that takes into account the bank's lending history as well as amortization and losses on outstanding loans. We focus on total bank profits and its components: net interest income, other...

We analyze the mortgage interest rate setting behavior of the four largest banks in the Dutch mortgage market using advertised interest rates at a daily frequency from October 1997 to July 2003. We find that the pass-through of funding cost changes into mortgage interest rates on 5 and 10 year...

We use a two-country model to examine how endogenous changes in monitoring intensity and exogenous changes in monitoring efficiency affect multinational-bank lending. First, an endogenous decline in monitoring intensity limits the amount of deposits that banks can attract. This lowers bank...