Asset Encumbrance, Bank Funding, and Fragility

• 成果类型: Article
• 署名作者: Ahnert, Toni; Anand, Kartik; Gai, Prasanna; Chapman, James
• 署名单位: Bank of Canada; Deutsche Bundesbank; University of Auckland
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhy107
• 发表日期: 2019
• 页码: 2422
• 关键词: risk; lender; games; debt

摘要

We model asset encumbrance by banks subject to rollover risk and study the consequences for fragility, funding costs, and prudential regulation. A bank's privately optimal encumbrance choice balances the benefit of expanding profitable, yet illiquid, investment funded by cheap long-term senior secured debt, against the cost of greater fragility from runs on unsecured debt. We derive testable implications about encumbrance ratios. The introduction of deposit insurance or wholesale funding guarantees induces excessive encumbrance and fragility. Limits on asset encumbrance or Pigovian taxes eliminate such risk-shifting incentives. Our results shed light on prudential policies currently being pursued in several jurisdictions.