We develop a model in which asset commonality and short-term debt of banks interact to generate excessive systemic risk …. Banks swap assets to diversify their individual risk. Two asset structures arise. In a clustered structure, groups of banks … quality of individual banks is opaque but can be inferred by creditors from aggregate signals about bank solvency. When bank …

Most analyses of banking crises assume that banks use real contracts but in practice contracts are nominal. We consider …

signal about banks' future defaults, investors update their expectations of bank solvency. If their expectations are low …

deposit growth significantly during the crisis. During the crisis, subsidiaries could not rely on their parent banks’ support …