Lately, there have been a lot of discussions in the media and in the academic sphere surrounding banks’ net interest margin in the low (or negative) interest rate environment. I have explained before how lowering interest rates below a certain threshold led to "margin compression" (see here), which…
Michael Bordo, John Duca, and Christoffer Koch recently produced a Cato Institute Research Brief on how policy uncertainty affects bank lending. The Cato Research Briefs in Economic Policy series allows economic researchers to write an accessible 2,000 word summary of an academic article that cuts through the…
In a previous blog posting, I suggested that there is no case for capital adequacy regulation in an unregulated banking system. In this ‘first-best’ environment, a bank’s capital policy would be just another aspect of its business model, comparable to its lending or reserving policies, say. Banks’…