IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/86409.html
   My bibliography  Save this paper

Banks' Disclosure of Information and Financial Stability Regulations

Author

Listed:
  • Okahara, Naoto

Abstract

This study proposes a model that analyzes the interaction between a bank and its creditors. The bank uses short-term wholesale funding and the creditors decide whether to roll over their loan by using information about the bank. The model shows that, when the creditors become more reluctant to roll over their loans since the bank heavily depends on such a debt, the bank does not issue the short-term debt excessively and its privately optimal amount of the debt in this situation corresponds to the socially desirable one. This implies that a regulation requiring banks to disclose information about their capital structures can by itself contribute to stabilizing the financial system. However, the model also shows that in order to ensure the result we need an additional regulation that bridges the information gap between banks and creditors

Suggested Citation

  • Okahara, Naoto, 2018. "Banks' Disclosure of Information and Financial Stability Regulations," MPRA Paper 86409, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:86409
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/86409/1/MPRA_paper_86409.pdf
    File Function: original version
    Download Restriction: no

    References listed on IDEAS

    as
    1. Jeremy C. Stein, 2012. "Monetary Policy as Financial Stability Regulation," The Quarterly Journal of Economics, Oxford University Press, vol. 127(1), pages 57-95.
    2. Daniel Covitz & Nellie Liang & Gustavo A. Suarez, 2013. "The Evolution of a Financial Crisis: Collapse of the Asset-Backed Commercial Paper Market," Journal of Finance, American Finance Association, vol. 68(3), pages 815-848, June.
    3. repec:wly:iecrev:v:57:y:2016:i::p:1135-1148 is not listed on IDEAS
    4. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 14-23.
    5. Douglas W. Diamond & Raghuram G. Rajan, 2001. "Liquidity Risk, Liquidity Creation, and Financial Fragility: A Theory of Banking," Journal of Political Economy, University of Chicago Press, vol. 109(2), pages 287-327, April.
    6. Viral V. Acharya & Douglas Gale & Tanju Yorulmazer, 2011. "Rollover Risk and Market Freezes," Journal of Finance, American Finance Association, vol. 66(4), pages 1177-1209, August.
    7. Gorton, Gary & Metrick, Andrew, 2012. "Securitized banking and the run on repo," Journal of Financial Economics, Elsevier, vol. 104(3), pages 425-451.
    8. Adam Copeland & Antoine Martin & Michael Walker, 2014. "Repo Runs: Evidence from the Tri-Party Repo Market," Journal of Finance, American Finance Association, vol. 69(6), pages 2343-2380, December.
    9. Stephen Morris & Hyun Song Shin, 2016. "Illiquidity Component Of Credit Risk," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 57, pages 1135-1148, November.
    10. Samuel G. Hanson & Anil K. Kashyap & Jeremy C. Stein, 2011. "A Macroprudential Approach to Financial Regulation," Journal of Economic Perspectives, American Economic Association, vol. 25(1), pages 3-28, Winter.
    11. Marcin Kacperczyk & Philipp Schnabl, 2010. "When Safe Proved Risky: Commercial Paper during the Financial Crisis of 2007-2009," Journal of Economic Perspectives, American Economic Association, vol. 24(1), pages 29-50, Winter.
    12. Calomiris, Charles W & Kahn, Charles M, 1991. "The Role of Demandable Debt in Structuring Optimal Banking Arrangements," American Economic Review, American Economic Association, vol. 81(3), pages 497-513, June.
    13. Klimenko, Nataliya & Moreno-Bromberg, Santiago, 2016. "The shadow costs of repos and bank liability structure," Journal of Economic Dynamics and Control, Elsevier, vol. 65(C), pages 1-29.
    14. Gary Gorton & Andrew Metrick, 2010. "Regulating the Shadow Banking System," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 41(2 (Fall)), pages 261-312.
    15. Sergey Chernenko & Adi Sunderam, 2014. "Frictions in Shadow Banking: Evidence from the Lending Behavior of Money Market Mutual Funds," Review of Financial Studies, Society for Financial Studies, vol. 27(6), pages 1717-1750.
    16. Sophia Chen, 2015. "Uncertainty and Investment; The Financial Intermediary Balance Sheet Channel," IMF Working Papers 15/65, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Short-term debt; Rollover risk; Macroprudential; Fire sales;

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:86409. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter). General contact details of provider: http://edirc.repec.org/data/vfmunde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.