Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/209989
Authors: 
Cao, Jin
Year of Publication: 
2011
Series/Report no.: 
Working Paper No. 2011/13
Publisher: 
Norges Bank, Oslo
Abstract: 
This paper provides a compact framework for banking regulation analysis in the presence of uncertainty between systemic liquidity and solvency shocks. It explains the asset price anomalies and bank lending freeze during the crisis. The paper shows how the coexistence of illiquidity and insolvency problems adds extra cost for banking regulation, making conventional regulatory policies fail, and why the unconventional central bank policy encourages moral hazard. A banking tax is proposed to cover the extra regulatory cost, and the regulatory cost can also be reduced by combining the advantages of several instruments.
Subjects: 
liquidity risk
insolvency risk
liquidity regulation
equity requirement
banking tax
JEL: 
E5
G21
G28
Persistent Identifier of the first edition: 
ISBN: 
978-82-7553-623-3
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Working Paper
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