This Economic Letter presents newly produced data on losses in the federal insurance program for credit union shares and on the rates at which federally insured credit unions (FICUs) failed. (Shares in credit unions are analogous to deposits in banks.) We compare these data to data for institutions insured by the Bank Insurance Fund (BIF) of the Federal Deposit Insurance Corporation (FDIC).We a...

We consider a model in which banks face two moral hazard problems: 1) asset substitution by shareholders, which can occur when banks make socially-inefficient, risky loans; and 2) managerial under-provision of effort in loan monitoring. The privately-optimal level of bank leverage is neither too low nor too high: It efficiently balances the market discipline that owners of risky debt impose on ...

This paper discusses different aspects of the notion of systemic risk. It contains a selective survey of the research on related topics, a review of some case studies of financial crises and failures, and a discussion pointing towards the importance of moral hazard as a key element of systemic risk. The main ideas studied are the links between: capital structure theory and bank capital regulati...

Since the collapse or failure of a bank could trigger an adverse financial repercussion and generate negative impacts, it is desirable to have an Early Warning System (EWS) that identifies potential bank failures or high-risk banks through the traits of financial distress. This research is aimed to construct a novel neural fuzzy Cerebellar Model Articulation Controller (FCMAC) as an alternative...

Riparian vegetation strips are widely used by river managers to increase streambank stability, among other purposes. However, though the effects of vegetation on bank stability are widely discussed they are rarely quantified, and generally underemphasize the importance of hydrologic processes, some of which may be detrimental. This paper presents results from an experiment in which the hydrolog...

The New Basel Capital Accord (Basel II) influences how financial institutions around the world, and especially European Union institutions, determine the amount of capital to reserve. However, as the recent global crisis has shown, the revision of Basel II is needed to reflect current trends, such as increased volatility and correlation, in the world financial markets. The overall objective of ...

In this paper, we consider a model in which spatial separation and limited communication create a transactions role for currency, and in which aggregate uncertainty associated with agents’ patterns of movement, creates a role for banks and allows the possibility of banking failures. We show that banks provide complete insurance in states of the world where there are no banking failures and that...