Asset encumbrance, bank funding, and fragility

Show simple item record Gai, Prasanna en Anand, K en Ahnert, T en Chapman, J en 2018-10-03T03:21:54Z en 2017 en
dc.identifier.isbn 978-92-95081-93-2 en
dc.identifier.issn 2467-0677 en
dc.identifier.uri en
dc.description.abstract We propose a model of asset encumbrance by banks subject to rollover risk and study the consequences for fragility, funding costs, and prudential regulation. An bank's choice of encumbrance trades off the benefit of expanding profitable investment funded by cheap long-term secured debt against the cost of greater fragility due to unsecured debt runs. We derive several testable implications about privately optimal encumbrance ratios. Deposit insurance or wholesale funding guarantees induce excessive encumbrance and exacerbate fragility. We show how regulations such as explicit limits on encumbrance ratios and revenue-neutral Pigovian taxes can mitigate the risk-shifting incentives of banks. en
dc.publisher European Systemic Risk Board en
dc.relation.ispartofseries ESRB Working Paper Series, No. 52, July 2017 en
dc.rights Items in ResearchSpace are protected by copyright, with all rights reserved, unless otherwise indicated. Previously published items are made available in accordance with the copyright policy of the publisher. en
dc.rights.uri en
dc.title Asset encumbrance, bank funding, and fragility en
dc.type Report en
dc.identifier.doi 10.2848/720260 en
dc.rights.holder Copyright: The author en en
pubs.commissioning-body European Systemic Risk Board en Frankfurt, Germany en
dc.rights.accessrights en
pubs.subtype Working Paper en
pubs.elements-id 653210 en Business and Economics en Economics en
pubs.number 52 en
pubs.record-created-at-source-date 2017-08-25 en

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