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Misdiagnosing Bank Capital Problems / Jeremy I. Bulow, Paul D. Klemperer.
- Format:
- Book
- Author/Creator:
- Bulow, Jeremy I.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w29223.
- NBER working paper series no. w29223
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2021.
- Summary:
- Banks' reluctance to repair their balance sheets, combined with deposit insurance and regulatory forbearance in recognizing greater risks and losses, can lead to solvency problems that look like liquidity (bank-run) crises. Regulatory forbearance incentivizes banks to both retain risky loans and reject new good opportunities. With sufficient regulatory forbearance, partially-insured banks act exactly as if they are fully insured. Stress tests certify that uninsured creditors will be paid, not that banks are solvent, and have ambiguous effects on the efficiency of investment.
- Notes:
- Print version record
- September 2021.
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