The financial crisis of 2007-2008 highlighted the risks that liquidity spirals pose to financial stability. We introduce a novel method for studying liquidity spirals and use this method to identify spirals before stock prices plummet and funding markets lock up. We show that liquidity spirals...

Under which conditions do usability constraints for regulatory capital buffers emerge? To answer this question, we build a non-linear structural banking sector model with a minimum capital requirement that banks are not allowed to breach, and a capital buffer requirement (CBR) that banks can...

Bank failures can stem from runs on otherwise solvent banks or from losses that render banks insolvent, regardless of withdrawals. Disentangling the relative importance of liquidity and solvency in explaining bank failures is central to understanding financial crises and designing effective...

This paper examines the relevance of banks' exposure to climate transition risk in the interbank lending market. Using transaction-level data on repo agreements, we first establish that banks with higher exposure to transition risk face significantly higher borrowing costs. This premium is a...

Effective monetary policy requires maintaining the short-term interbank rate close to the policy rate while limiting its volatility, ensuring smooth transmission, and reducing banks' liquidity and interest rate risks. This paper seeks to identify and explain the drivers of volatility in...

Securities dealers play a central role intermediating funds in the U.S. short-term money markets. This intermediation involves risk, which can be mitigated by holding buffers of liquid securities. The cost of holding these buffers - the liquidity risk premium - is driven by the opportunity cost...

The purpose of this research is to analyze research trends related to banking liquidity creation, the factors influencing this process, the impact of created liquidity, and the direction for further research. Bibliographic sources were obtained from the Scopus database spanning from 2013 to...

Motivated by the coexistence of retail and wholesale banks with distinct risk profiles under uniform capital regulation, and by the lack of quantitative evidence on whether differentiated capital requirements can reduce bank runs and interbank frictions in low-income monetary unions, this paper...

In essence, the currently large stablecoins are electronic money issued by narrow balance sheet vehicles into a distributed ledger (or a "programmable platform"). Many believe that they will have significant success as a new form of money. Members of the current US administration expect that US...

We propose a theory of stablecoin disintermediation, whereby stablecoins not only erode banks' deposit franchises but also transmit liquidity stress to the banking system. Using transaction-level data linking onchain transactions to wholesale interbank payments, we document the first evidence of...

Since U.S. bank capital holdings began rising almost concurrently with the monetary policy change after 2008, we examine the role of capital requirements for monetary policy regimes. While standard models predict that equilibrium determination and responses to aggregate shocks are fundamentally...

This study evaluates the early impact of Central Bank Digital Currencies (CBDCs) on key financial indicators in The Bahamas, focusing on the introduction of the SandDollar-the world's first fully implemented retail CBDC. Using the Synthetic Control Method (SCM), the analysis constructs...

The proposed revision of the Swiss Banking Act introduces a public liquidity backstop (PLB) for distressed systemically important banks (SIBs), in part to facilitate resolution. We examine the impact of the PLB on fiscal balances, societal welfare, and the incentives of bank shareholders and...

Since 2014, several countries have implemented the Basel III countercyclical capital buffer (CCyB) to enhance the banking sector's resilience against risks arising from excessive credit growth. We analyze the CCyB decision-making process of macroprudential authorities across Europe. Our findings...

The purpose of this paper is to empirically examine the effects of capital and liquidity on bank stability as well as the existence of a potential complementary or substitute relationship between both dimensions to explain bank stability. We use a sample of 16,061 banks from 27 countries during...

This paper measures the post-treatment effects of Central Bank Digital Currencies (CBDCs) on mobile money and outstanding loans from commercial banks as a percentage of the GDP in Nigeria and the Bahamas, respectively, from the perspective of financial inclusion. The literature on the topic has...

We examine the evolution of equity capital in the U.S. banking industry over the past 35 years. Earnings are the major driver of increases in equity capital in the banking industry. While common stock issuance is frequent, amounts issued are generally small and do not contribute meaningfully to...

This paper examines the existence and magnitude of an "LCR premium" in Peru's interbank market by exploiting the July 1, 2019 reform that eliminated the punitive outflow weights on repo collateral under the Liquidity Coverage Ratio (LCR). Using daily transactions from January 2019 to February...