This paper explains why banks derive a benefit from being highly interconnected. We show that when banks are protected by government guarantees they can significantly increase their expected returns by channeling funds ...

We introduce a new measure of systemic risk, the change in the conditional joint probability of default, which assesses the effects of the interdependence in the financial system on the general default risk of sovereign ...

In the aftermath of the financial crisis, the ECB has experienced an unprecedented deterioration in the level of trust. This raises the question as to what factors determine trust in central banking. We use a unique ...

We analyze the emergence of systemic risk in a network model of interconnected bank balance sheets. The model incorporates multiple sources of systemic risk, including size of financial institutions, direct exposure from ...

This is a chapter for a forthcoming volume Oxford Handbook of Financial Regulation (Oxford University Press 2014) (eds. Eilís Ferran, Niamh Moloney, and Jennifer Payne). It provides an overview of EU financial regulation ...

We investigate the implications of providing loan officers with a non-linear compensation structure that rewards loan volume and penalizes poor performance. Using a unique data set provided by a large international commercial ...

We show that property damages from weather-related natural disasters significantly weaken the stability of banks with business activities in affected regions, as reflected in lower z-scores, higher probabilities of default, ...

This paper examines the relationship between oil price movements and systemic risk of many financial institutions in major petroleum-based economies. We estimate ?CoVaR for those institutions and thereby observe the presence ...

In the last decade, central bank interventions, flights to safety, and the shift in derivatives clearing resulted in exceptionally high demand for high quality liquid assets, such as German treasuries, in the securities ...

"Using a novel regulatory dataset of fully identified derivatives transactions, this paper provides the first comprehensive analysis of the structure of the euro area interest rate swap (IRS) market after the start of the ...