G21 - Banks; Depository Institutions; Micro Finance Institutions; Mortgages
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Liquidity Transformation and Bank Capital Requirements
This paper presents a dynamic general equilibrium model where asymmetric information about asset quality leads to asset illiquidity. Banking arises endogenously in this environment as banks can pool illiquid assets to average out their idiosyncratic qualities and issue liquid liabilities backed by pooled assets whose total quality is public information. -
Macroprudential Regulation and Systemic Capital Requirements
In the aftermath of the financial crisis, there is interest in reforming bank regulation such that capital requirements are more closely linked to a bank's contribution to the overall risk of the financial system. In our paper we compare alternative mechanisms for allocating the overall risk of a banking system to its member banks. -
Regulatory Constraints on Bank Leverage: Issues and Lessons from the Canadian Experience
The Basel capital framework plays an important role in risk management by linking a bank's minimum capital requirements to the riskiness of its assets. Nevertheless, the risk estimates underlying these calculations may be imperfect, and it appears that a cyclical bias in measures of risk-adjusted capital contributed to procyclical increases in global leverage prior to the recent financial crisis. -
The Role of Foreign Exchange Dealers in Providing Overnight Liquidity
This paper illustrates that dealers in foreign exchange markets not only provide intraday liquidity, they are key participants in the provision of overnight liquidity. Dealing institutions receive compensation for holding undesired inventory balances in part from the information they receive in customer trades. -
Are There Canada-U.S. Differences in SME Financing?
Previous surveys of Canadian and U.S. business owners suggest that access to financing in Canada may be more problematic than in the United States. Using the 2003 Survey of Small Business Financing in the United States and the 2004 Survey on Financing of Small and Medium Enterprises in Canada, this paper examines whether this perception can be better quantified. -
The Role of Bank Capital in the Propagation of Shocks
Recent events in financial markets have underlined the importance of analyzing the link between the financial health of banks and real economic activity. This paper contributes to this analysis by constructing a dynamic general equilibrium model in which the balance sheet of banks affects the propagation of shocks. -
What To Do about Bilateral Credit Limits in the LVTS When a Closure Is Anticipated: Risk versus Liquidity Sharing among LVTS Participants
The authors examine the effect of a trade-off between shared credit risk and liquidity efficiency, among participants in Tranche 2 of the Large Value Transfer System (LVTS T2), on their decisions to leave open, or close, their bilateral credit limits (BCLs) to a participant at risk of imminent closure. -
Market Structure and the Diffusion of E-Commerce: Evidence from the Retail Banking Industry
This paper studies the role that market structure plays in affecting the diffusion of electronic banking. Electronic banking (and electronic commerce more generally) reduces the cost of performing many types of transactions for firms. -
Non-Linearities, Model Uncertainty, and Macro Stress Testing
A distinguishing feature of macro stress testing exercises is the use of macroeconomic models in scenario design and implementation. It is widely agreed that scenarios should be based on "rare but plausible" events that have either resulted in vulnerabilities in the past or could do so in the future.