We study the interplay of capital and liquidity regulation in a general equilibrium setting by focusing on future funding risks. The model consists of a banking sector with long-term illiquid investment opportunities that need to be financed by short-term debt and by issuing equity. Reliance on...

We analyse the poisonous interaction between bank rescues, financial fragility and sovereign debt discounts. In our model balance sheet constrained financial intermediaries finance both capital expenditure of intermediate goods producers and government deficits. The financial intermediaries face...

This paper studies the optimality of a banking union in a setting with cross-country liquidity spillovers and moral hazard. Generally, the banking union improves welfare by efficiently providing liquidity to banks, thus limiting spillovers from bank defaults across the member countries. At the...

This paper explores financial stability policies for the shadow banking system. I tie policy options to economic mechanisms for shadow banking that have been documented in the literature. I then illustrate the role of shadow bank policies using three examples: agency mortgage real estate...

This study constitutes an exploratory analysis of the economic role of banks under different prudential frameworks. It considers an agent-based computational model populated by consumers, firms, banks and a central bank whose out-of-equilibrium interactions replicate the conjunct dynamics of a...