IDEAS home Printed from https://ideas.repec.org/p/imf/imfwpa/2017-068.html
   My bibliography  Save this paper

How is the likelihood of fire sales in a crisis affected by the interaction of various bank regulations?

Author

Listed:
  • Mr. Divya Kirti
  • Vijay Narasiman

Abstract

We present a model that describes how different types of bank regulation can interact to affect the likelihood of fire sales in a crisis. In our model, risk shifting motives drive how banks recapitalize following a negative shock, leading banks to concentrate their portfolios. Regulation affects the likelihood of fire sales by giving banks the incentive to sell certain assets and retain others. Ex-post incentives from high risk weights and the interaction of capital and liquidity requirements can make fire sales more likely. Time-varying risk weights may be an effective tool to prevent fire sales.

Suggested Citation

  • Mr. Divya Kirti & Vijay Narasiman, 2017. "How is the likelihood of fire sales in a crisis affected by the interaction of various bank regulations?," IMF Working Papers 2017/068, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2017/068
    as

    Download full text from publisher

    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=44763
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Coen, Jamie & Lepore, Caterina & Schaanning, Eric, 2019. "Taking regulation seriously: fire sales under solvency and liquidity constraints," Bank of England working papers 793, Bank of England.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:2017/068. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Akshay Modi (email available below). General contact details of provider: https://edirc.repec.org/data/imfffus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.