Series: IMF Working Papers
Author(s): Fabian Valencia
Publisher: INTERNATIONAL MONETARY FUND
Publication Date: 01 October 2011
Keywords: Bank Leverage, Macroprudential regulation, bank capital, capital requirements, risk of default, bank default, bank risk, Financial Markets and the Macroeconomy,
This paper develops a model to assess how monetary policy rates affect bank risk-taking. In the model, a reduction in the risk-free rate increases lending profitability by reducing funding costs and increasing the...