Distributional Effects of Bank Bailouts

Financial crises lead to policy interventions that carry significant fiscal costs (Laeven and Valencia, 2013). While policy makers prefer to follow the prescription in Bagehot (1873) that public funds should only be provided to institutions that are expected to repay them, it is difficult to determine ex ante an institution’s ability to repay. The resulting […]

Macroprudential Policy with Capital Buffers

Courtesy of Josef Schroth The Global Financial Crisis exposed taxpayers to potential losses from bank failures and significantly disrupted financial intermediation. A natural question arises from these experiences: Should regulators require banks to hold more capital and, if so, in what form? Higher minimum requirements reduce losses to stakeholders in case of bank failures but may constrain […]