EconPapers    
Economics at your fingertips  
 

Bank Capital, Liquidity and Systemic Risk

Jürgen Eichberger and Martin Summer ()

No 04-45, Sonderforschungsbereich 504 Publications from Sonderforschungsbereich 504, Universität Mannheim, Sonderforschungsbereich 504, University of Mannheim

Abstract: We analyze the impact of capital adequacy regulation on bank insolvency and aggregate investment. We develop a model of the banking system that is characterized by the interaction of many heterogeneous banks with the real sector, interbank credit relations as a consequence of bank liquidity management and an insolvency mechanism. This allows us to study the impact of capital adequacy regulation on systemic risk. In particular we can analyze the impact of regulation on contagious defaults arising from mutual credit relations. We show that the impact of capital adequacy on systemic stability is ambiguous and that systemic risk might actually increase as a consequence of imposing capital constraints on banks. Furthermore we analyze the indirect consequences of capital adequacy regulation that are transmitted to the real economy by their impact on equilibrium interbank rates and thus the opportunity costs of liquidity within the banking system.

Pages: 13 pages
Date: 2004-11-24
New Economics Papers: this item is included in nep-fin and nep-rmg
Note: We would like to thank Eva Terberger for helpful discussions in the early stages
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://www.sfb504.uni-mannheim.de/publications/dp04-45.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to www.sfb504.uni-mannheim.de:80 (No such host is known. )

Related works:
Journal Article: Bank Capital, Liquidity, and Systemic Risk (2005) Downloads
Working Paper: Bank capital, liquidity and systemic risk (2004) Downloads
Working Paper: Bank Capital, Liquidity and Systemic Risk (2004) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:xrs:sfbmaa:04-45

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Sonderforschungsbereich 504 Publications from Sonderforschungsbereich 504, Universität Mannheim Contact information at EDIRC., Sonderforschungsbereich 504, University of Mannheim
Bibliographic data for series maintained by Carsten Schmidt ( this e-mail address is bad, please contact ).

 
Page updated 2021-08-01
Handle: RePEc:xrs:sfbmaa:04-45