We propose a novel conceptual approach to transparently characterizing credit market outcomes in economies with multi-dimensional borrower heterogeneity. Based on characterizations of securities' implicit demand for bank equity capital, we [...]
The COVID-19 crisis paralyzed huge parts of the planet in weeks. It not only infected the population but injected a gargantuan dose of uncertainty into the system. In that regard, [...]
Maintaining sufficient liquidity in the financial system is vital for its stability. However, since returns on liquid assets are typically low, individual financial institutions may seek to hold fewer such [...]
The widespread economic damage caused by the ongoing COVID-19 pandemic poses the first major test of the bank regulatory reforms put in place following the global financial crisis. This study [...]
Using a sample of 625 microfinance institutions (MFI) across 40 countries from 2010-2015, we empirically examine the effect of buffer capital on the performance of MFIs and how this effect [...]
In the past 30 years, defaults on corporate bonds in the US have been substantially above the historical average. Using firm-level data, this column shows that the increase in credit [...]
We explore the actions of financially distressed banks in two distinct periods that include financial crises (1985-1994, 2005-2014) and differ in bank regulations, especially concerning capital requirements and enforcement. In [...]
We study the impact of higher capital requirements on banks’ decisions to grant collateralized rather than uncollateralized loans. We exploit the 2011 EBA capital exercise, a quasi-natural experiment that required [...]
The Basel I Accord introduced a discontinuity in required capital for undrawn credit commitments. While banks had to set aside capital when they extended commitments with maturities in excess of [...]
We are living through a period of major political and economic uncertainty. While Brexit and new global forces reshape our economy, the rise of digital technologies could set our financial [...]