We investigate how bank migration across state lines over the last quarter century has affected the size and covariance of business fluctuations within states. Starting with a two-state version of the unit banking model in Holmstrom and Tirole (1997), we conclude that the theoretical effect of...

We examine the prudential implications of the co-existence between the standardized approach and the internal ratings-based (IRB) approach, as defined in the new Basle Accord. We consider a model in which sophisticated banks, eligible for the IRB approach, and unsophisticated banks, eligible for...

In recent years, regulators have increased their focus on the capital adequacy of banking institutions to enhance the stability of the financial system. The purpose of the present paper is to shed some light on whether and how Swiss Banks react to constraints placed by the regulator on their...

We investigate how bank migration across state lines over the last quarter century has affected the size and covariance of business fluctuations within states. Starting with a two-state version of the unit banking model in Holmstrom and Tirole (1997), we conclude that the theoretical effect of...

We address two questions about the impact of the UBS-SBC merger: (i) How will the concentration in the Swiss retail banking market change, and (ii) what are the expected consequences for the consumers. The answer to the first question is based on a comparison of Herfindahl and C3-indices in 1997...

We try to detect contagion effects within the Swiss banking sector by examining the impact of the Russian debt moratorium on Swiss banks' stock prices. In a first step, using event study methodology, we compute Swiss banks' stock returns for a number of events related to the Russian moratorium....

The stability of the banking sector is an essential precondition for a well-functioning economy. Enhancing this stability was one of the main motivations for the elaboration of the new capital adequacy framework, Basel II. The present paper examines the impact of Basel II on risk allocation in...

This paper evaluates the reduction of credit risk that can be achieved in Switzerland by a national diversification of bank lending. Using a credit risk model based on corporate default rates, I find that the risk of a nationally diversified loan portfolio is up to 20% smaller than the sum of...

We investigate how integration of bank ownership across states has affected economic volatility within states. In theory, bank integration could cause higher or lower volatility, depending on whether credit supply or credit demand shocks predominate. In fact, year-to-year fluctuations in a...