Network reactions to banking regulations

• 成果类型: Article; Proceedings Paper
• 署名作者: Erol, Selman; Ordonez, Guillermo
• 署名单位: Massachusetts Institute of Technology (MIT); Carnegie Mellon University; University of Pennsylvania; National Bureau of Economic Research
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2017.03.005
• 发表日期: 2017
• 页码: 51-67
• 关键词: Banking regulations; Interbank networks; Systemic risk

摘要

Optimal regulatory restrictions on banks have to solve a delicate balance. Tighter regulations reduce the likelihood of banks' distress. Looser regulations foster the allocation of funds toward productive investments. With multiple banks, optimal regulation becomes even more challenging. Banks form partnerships in the interbank lending market in order to face liquidity needs and to meet investment possibilities. We show that the interbank network can suddenly collapse when regulations are pushed beyond a critical level, with a discontinuous increase in systemic risk as the cross-insurance of banks collapses. (C) 2017 Elsevier B.V. All rights reserved.