In general, banks play a growth-enhancing role for the real economy. However, distorted incentives for banks, depositors, and regulators in connection with bank insolvency may corrupt banks' credit allocation and monitoring decisions, leading to suboptimal real economic outcomes. A rules-based prompt resolution regime for insolvent banks may reestablish the incentive system and provide for econ...

Credit reporting systems are an important ingredient for financial markets. These systems are based upon the unique identification of borrowers, which is enabled if a compulsory identification system exists in a country. We present evidence derived from difference-in-difference analyses on the impact of the interplay of credit reporting and identification systems on financial access and interme...

The contribution of this paper is in emphasizing endogenous credit rationing in the analysis of effects of bankruptcy rules on entrepeneurs’ decisions with respect to risktaking and ex ante skill-development. Unlike most of the literature, both the debt claim and the amount of debt financing is endogenous in our exercise. This allows us to determine the extent of credit rationing that banks use...

We construct a model of rational bubbles under credit frictions and show that bubbles held by banks can generate large credit expansions followed by financial crisis. The size of boom-bust is somewhat larger than the case in which savers directly hold bubbles. Thus massive credit exansion during booms can be interpreted as an early warning indicator of possible subsequent crisis.

Traditionally, policymakers, communities, and industry have regarded the Community Reinvestment Act (“CRA”) as a positive mandate for banks and thrifts to do good by increasing investment in lowand moderate-income (“LMI”) neighborhoods. The specific purpose of CRA is to encourage federally insured depository institutions “to help meet the credit needs of the local communities in which they are ...