Principles on Bail-In Execution
Bail-in within resolution is a core part of resolution strategies of global systemically important banks (G-SIBs). It refers to the write-down and/or conversion of liabilities into equity and helps implement [...]
Understanding the Effects of the U.S. Stress Tests
The macroprudential elements of the stress tests arise from: the scenario design, which is set to vary over time with the economic and financial cycles; the requirement to hold portfolios [...]
When Losses Turn Into Loans: The Cost of Undercapitalized Banks
We provide evidence that a weak banking sector contributed to low productivity following the European debt crisis. An unexpected increase in capital requirements provides a natural experiment to study the [...]
Ambiguity Attitudes, Leverage Cycle and Asset Prices
Financial crises often originate in debt markets, where collateral constraints and opacity of asset values generate intrinsic instability. In such ambiguous contexts endogenous beliefs formation plays a crucial role in [...]
1930: First Modern Crisis
Modern financial crises are difficult to explain because they do not always involve bank runs, or the bank runs occur late. For this reason, the first year of the Great [...]
How Do Foreclosures Exacerbate Housing Downturns?
This paper uses a structural model to show that foreclosures played a crucial role in exacerbating the recent housing bust and to analyze foreclosure mitigation policy. We consider a dynamic [...]
The Effects of Competition in Consumer Credit Market
This paper finds that banks and non-banks respond differently to increased competition in consumer credit markets. Increased competition and the greater threat of failure induces banks to specialize more in [...]
Dynamism Diminished: The Role of Housing Markets and Credit Conditions
The Great Recession and its aftermath saw the worst relative performance of young firms in at least 35 years. More broadly, as we show, young-firm activity shares move strongly with [...]
Deposit Market Power, Funding Stability and Long-Term Credit
This paper shows that banks raising deposits in more concentrated markets have more funding stability, which enhances banks’ ability to extend longer-maturity loans. We show that banks raising deposits in [...]
Corporate Debt, Firm Size and Financial Fragility in Emerging Markets
The post-Global Financial Crisis period shows a surge in corporate leverage in emerging markets and a number of countries with deteriorated corporate financial fragility indicators (Altman’s Z-score). Firm size plays [...]