incentives to take risk and raise failure probabilities. The competition-stability trade-off is characterized and the … the intensity of competition. -- antitrust ; regulation ; crisis ; risk-taking ; mergers ; state aid ; bail-outs …

We present a network model of the interbank market in which optimizing risk averse banks lend to each other and invest … contribution of systemic risk by means of Shapley values. Within this framework we analyze the effects of prudential policies on … the stability/efficiency trade-off. Liquidity requirements unequivocally decrease systemic risk but at the cost of lower …

coordinated ones when governments care equally about bank profits, taxpayers, and consumers. …

identify an asymmetric information problem: borrowers signal low financial risk to banks who are uncertain about borrower risk …

We argue that risk sharing motivates the bank-wide structure of bonus pay. In the presence of financial frictions that … make external financing costly, the optimal contract between shareholders and employees involves some degree of risk … to rationalize with incentive theories of bonus pay - but support an important risk sharing motive. In particular …

market is endogenously formed. Bank assets are hit by idiosyncratic shocks drawn from a thin tailed distribution. The uneven … to be heavily indebted to other banks, their liquidation can trigger other bank failures. We find that the distribution …

How does uncertainty affect the costs of raising finance in the bond market and via bank loans? Empirically, this paper … finds that heightened uncertainty is accompanied by an increase in corporate bond yields and a decrease in bank lending … risk of firm default. …

. We show that the risk allocation is efficient if there is no workout of banking crises. In this case, banks will shift … part of the risk to depositors. In contrast, under a workout of banking crises, depositors receive non-contingent contracts … generations, even if the underlying risk is small or zero. This provides a new justification for capital requirements. …

intermediation. In one structure, called Bank, the intermediary is financed by issuing debt contracts to investors, and thus … firms, and provide funds to higher-risk, higher-return firms. …