Interest rate caps, also called usury ceilings, are a widely used policy tool to protect consumers from excessive charges by loan providers. However, they are often cited as a barrier for the advancement of financial inclusion, as they may reduce the incentives to provide loans to lower-income...

Banks provide risky loans to firms which have superior information regarding the quality of their projects. Due to asymmetric information the banks face the risk of adverse selection. Credit Value-at-Risk (CVaR) regulation counters the problem of low quality, i.e. high risk, loans and therefore...

The fixing of the Libor and Euribor benchmark rates has proven vulnerable to manipulation. Individual rate-setters may have incentives to fraudulently distort their submissions. For the contributing banks to collectively agree on the direction in which to rig the rate, however, their interests...

We empirically investigate why wholesale funding is fragile by providing the first study of how individual banks borrow and lend in the euro unsecured and secured interbank market. Consistent with theories in which lenders enforce market discipline by monitoring counterparty credit risk and...

We exploit the introduction of free banking laws in US states during the 1837-1863 period to examine the impact of removing barriers to bank entry on bank competition and economic growth. As governments were not concerned about systemic stability in this period, we are able to isolate the...

We study whether floods can affect financial stability through a credit risk channel. Our focus is on the Netherlands, a country situated partly below sea level, where insurance policies exclude property damages caused by some types of floods. Using geocoded data for close to EUR 650 billion in...

Various economic theories are available to explain the existence of credit and default cycles. There remains empirical ambiguity, however, as to whether or these cycles coincide. Recent papers_new suggest by their empirical research set-up that they do, or at least that defaults and credit...

Dynamic models for credit rating transitions are important ingredients for dynamic credit risk analyses. We compare the properties of two such models that have recently been put forward. The models mainly differ in their treatment of systematic risk, which can be modeled either using discrete...

We model 1927-1997 U.S. business failure rates using a time series approach based on unobserved components. Clear evidence is found of cyclical behavior in default rates. The cycle has a period of around 10 years. We also detect longer term movements in default probabilities and default...

We model 1981–2002 annual US default frequencies for a panel of firms in different rating and age classes. The data is decomposed into a systematic and firm-specific risk component, where the systematic component reflects the general economic conditions and default climate. We have to cope...