This paper reviews academic studies of bank capital regulation in an effort to evaluate the
intellectual foundation for the imposition of the Basel I and Basel II systems of risk-based …

Deposit insurance is a widely adopted policy to promote financial stability in the banking
sector. Deposit insurance helps ensure depositors' confidence in the financial system and …

The global financial crisis triggered severe shocks for developing countries, whose embrace
of greater commercial and financial openness has increased their exposure to external …

We study ex post efficient policy responses to a run on the banking system and the ex ante
incentives these responses create. We show that the efficient response to a run is typically …

We ask how deposit insurance systems and ownership of banks affect the degree of market
discipline on banks' risk-taking. Market discipline is determined by the extent of explicit …

Banks are intrinsically fragile because of their role as liquidity providers. This results in
under-provision of liquidity. We analyze the effect of government guarantees on the …

This second edition of The Industrial Organization explores the study of the structure of
individual banks, banking markets, and their interactions. The book has the same two key …

Although much of banking theory and regulation is based on banks modeled as fragile
liquidity transformers, this view does not appear to have solid empirical foundation. We show …

We modify the 1983 Diamond and Dybvig model so that banks offer liquidity services to
depositors, raise equity funding, make risky loans, and invest in safe, liquid assets. Banks …

This paper studies the effects of government guarantees on the interconnection between
banking and sovereign debt crises in a framework where both the banks and the …