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.
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.