Mahmoud Elamin

This paper investigates whether the fear of losing its reputation can discipline a credit rating agency (CRA) in the structured finance market, where products are opaque and ratings are unverifiable.

We revisit Goldstein and Pauzner (2005) and show that, in the optimal demand-deposit contract subject to sequential service, banks hold safe assets to insure investors against investment risk, reducing the probability of a bank run.

I show, under intuitive conditions on the risk-averse utility function, the nonoptimality of the Diamond and Dybvig (1983) contract in the Goldstein and Pauzner (2005) environment.

This paper identifies rating verifiability as a key difference that explains why credit rating agencies (CRAs) failed to mitigate information asymmetries in the structured finance market but succeeded in the bond market.

This Commentary examines the maturity structure of assets and liabilities to identify the underlying factors responsible for the rise in interest rate risk and the differences between large and small banks.

Average interest rate risk in the banking system has been increasing since the end of the financial crisis and is almost back to its pre-recession level. But the increase has not occurred uniformly at large and small banks.