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We investigate how provisioning models affect bank regulation. We study an accuracy vs. timeliness trade-off between an incurred loss model (IL) and a current expected credit loss model (CECL). Relative to IL, CECL improves efficiency by enabling timely intervention to curb inefficient ex post...
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We study the role of reporting rules in the context of bank runs. In our model, a financial institution receives an early but imprecise estimate of the performance of its investment and issues a report subject to a reporting rule. We find that, from a financial-stability standpoint, the optimal...
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This paper examines banks' accounting choices between fair-value and historical-cost accounting when reported accounting information is used for capital requirement regulation. In choosing fair-value relative to historical-cost, banks must consider potential benefits of additional lending in...
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