Why High Leverage is Optimal for Banks

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Benefits and Costs of Bank Capital (2016, background): “…value intrinsic to bank Electronic copy available at: https://ssrn.com/abstract=2838437 10 INTERNATIONAL MONETARY FUND debt (Song and Thakor 2007; DeAngelo and Stulz 2013).4 This reduces the cash investors’ surplus, along with bank profits, and can harm bank borrowers through a higher cost of…”
Capital requirements, risk choice, and liquidity provision in a business-cycle model (2020, unknown): “…Dewatripont and Tirole (1994, 1994a, 2012)), or attributes high leverage ratios to banks' role as liquidity and safe asset providers (for example Diamond and Rajan (2001), Diamond and Rajan (2000), Gorton and Winton (1995), Gorton et al. (2012), DeAngelo and Stulz (2013), and Hanson et al. (2014)).”