Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/305403 
Year of Publication: 
2024
Series/Report no.: 
Sveriges Riksbank Working Paper Series No. 441
Publisher: 
Sveriges Riksbank, Stockholm
Abstract: 
Shocks to banks' ability to raise liquidity at short notice can lead to depositor panics, as evidenced by recent bank failures. Why don't banks take a more active role in managing these risks? In a standard bank-run model, we show that risk management failures are most prevalent when exposures are more severe and managing risk would be particularly valuable. Bank capital and deposit insurance coverage act as substitutes for risk management on the intensive margin but as complements on its extensive margin, encouraging the adoption of risk management operations. We provide insights for the appropriate regulation of bank risk-management operations.
Subjects: 
Banking crises
depositor withdrawals
asset valuations
risk management
JEL: 
G01
G21
G23
Document Type: 
Working Paper

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