Bank capital, liquid reserves, and insolvency risk

• 成果类型: Article
• 署名作者: Hugonnier, Julien; Morellec, Erwan
• 署名单位: Swiss Finance Institute (SFI); Swiss Federal Institutes of Technology Domain; Ecole Polytechnique Federale de Lausanne; Centre for Economic Policy Research - UK
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2017.05.006
• 发表日期: 2017
• 页码: 266-285
• 关键词: banks; Liquidity buffers; capital structure; Insolvency risk; regulation

摘要

We develop a dynamic model of banking to assess the effects of liquidity and leverage requirements on banks' financing decisions and insolvency risk. In this model, banks face taxation, issuance costs of securities, and default costs and maximize shareholder value by choosing their debt-to-asset ratio, deposits-to-debt ratio, liquid asset holdings, equity issuance and default policies in response to these frictions as well as regulatory requirements. Our analytic characterization of the bank policy choices shows that imposing liquidity requirements leads to lower bank losses in default at the cost of an increased likelihood of default. Combining liquidity and leverage requirements reduces both the likelihood of default and the magnitude of bank losses in default. (C) 2017 Elsevier B.V. All rights reserved.