In the wake of the 2008 financial tsunami, existing methods and tools for managing financial risks have been criticized for weaknesses in monitoring and alleviating risks at the systemic level. A 2009 article in Nature suggested new approaches to modeling economic meltdowns are needed to prevent future financial crises. However, existing studies have not focused on analysis of systemic risk at ...

In a version of the Diamond and Dybvig [8] model with aggregate uncertainty, we show that there exists an equilibrium with the following properties: all consumers deposit at the bank, all patient consumers wait for the last period to withdraw, and the bank fails with strictly positive probability. Furthermore, we show that the probability of a bank failure remains bounded away from zero as the ...

NTEREST IN BANKING MATTERS surged in the 1980s, when the U.S. banking system experienced considerable difficulties after several decades of stability. During the decade, the number of bank failures increased sharply, and banks in general experienced increasing problem loans and dwindling capital. Most banks recovered their financial strength in the early 1990s thanks to improved economic condit...

Numerous papers following seminal work of Diamond and Dybvig have attempted to analyze self-generated market failures such as bank runs and currency attacks within a framework of self-consistent expectations. The common feature of these models is an initial committed move, which can benefit agents if they pool resources, but which leaves them open to a risk of coordination failure (the bank run...

The Russian banking sector experienced considerable turmoil in the late 1990s, especially around the Russian banking crisis in 1998. The question is what types of banks are vulnerable to shocks and whether or not bank-specific characteristics can be used to predict vulnerability to failures. In this study we employ a parametric logit model and a nonparametric trait recognition approach to predi...

THE FEDERAL BANKING REGULATORS: AGENCY CAPTURE, REGULATORYFAILURE, AND INDUSTRY COLLAPSE DURING THE 2008 FINANCIAL CRISISbyJUSTIN REXAugust 2013Advisor: Dr. Marjorie Sarbaugh-ThompsonMajor: Political ScienceDegree: Doctor of Philosophy This dissertation examines the process of agency capture at four federal bank regulatoryagencies leading up to the 2008 finan...

In order to protect the public's confidence in deposit money, governments usually guarantee bank deposits implicitly or through an explicit deposit insurance system. Thus bank insolvency does not induce immediate bank runs. In many episodes of banking crises, several years passed quietly after bank insolvency had occurred, with the insolvency continuing to develop under the surface, and the ras...

We examine the impact of economy wide credit tightening on bank failures and investigate relationship between tighter monetary policy while accounting for balance sheet variables. Using a sample U.S. banks from 1984 to 2020, we find following: i) increases in corporate spreads lead significant increase aggregate failures; ii) lower return equity higher allowances loan losses are associated with...