International College of Economics and Finance

ICEF/LFE Research Seminar by Sergey Tsyplakov (Darla Moore School of Business)

On Tuesday, January 23 at 4.40 pm, room 3402 (Shabolovka str. 26) ICEF and LFE held the Research Seminar in Finance.
Speaker: Sergey Tsyplakov (Darla Moore School of Business)
Theme: "Bank Bailouts, Bail-ins, or Bankruptcy? A Dynamic Model and Empirical Tests of Optimal Regulatory Design" joint with Allen N. Berger, Charles P. Himmelberg, and Raluca A. Roman.

Abstract: We present a dynamic model of optimal regulatory design of three regimes that deal with distress of large, complex banking organizations. These regimes are 1) bailout, as under TARP; 2) bail-in, as under the Orderly Liquidation Authority; and 3) traditional bankruptcy, as under the CHOICE Act. Model results suggest that only the bail-in tailored to individual banks provides incentives for banks to rebuild capital preemptively during financial distress. Empirical tests of changes in capital ratios and speeds of adjustment in response to the shift from the pre-crisis bailout regime to the post-crisis bail-in regime corroborate the predictions of the model.


Forthcoming and past seminars