The financial crisis has been attributed partly to perverse incentives for traders at banks and has led policy makers to propose regulation of banks' remuneration packages. We explain why poor incentives for traders cannot be fully resolved by only regulating the bank's top executives, and why...

We estimate the size of the annual funding advantage for a sample of 151 large European banks over the period 1-1-2008 until 15-6-2012 using rating agencies "assessment of banks" creditworthiness with and without external support. We find that the size of the funding advantage is large and...

Large banks derive a funding advantage from being too-big-to-fail, while small banks do not. To estimate the funding advantage we explain the CDS spreads of small banks in six major European countries during the crisis by market fundamentals and bank-specific characteristics. Next, we...

We compare systemic risk in the banking sector, the insurance sector, the construction sector, and the food sector. To measure systemic risk, we use extreme negative returns in stock return data for the twenty largest U.S. Firms in each sector. We find that systemic risk is significantly larger...