01829cas a2200289 a 4500 AALejournalIMF014521 230101c9999 xx r poo 0 0eng d 5.00 USD 9781498306515 1018-5941 BD-DhAAL BD-DhAAL Agur, Itai. Bank Risk Within and Across Equilibria / Itai Agur. Washington, D.C. : International Monetary Fund, 2014. 1 online resource (37 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students The global financial crisis highlighted that the financial system can be most vulnerable when it seems most stable. This paper models non-linear dynamics in banking. Small shocks can lead from an equilibrium with few bank defaults straight to a full freeze. The mechanism is based on amplification between adverse selection on banks' funding market and moral hazard in bank monitoring. Our results imply trade-offs between regulators' microprudential desire to shield individual weak banks and the macroprudential consequences of doing so. Moreover, limiting bank reliance on wholesale funding always reduces systemic risk, but limiting the correlation between bank portfolios does not. Mode of access: Internet Adverse Selection imf Financial Crisis imf Interest Rate imf WP imf IMF Working Papers; Working Paper ; No. 2014/116 Full text available on IMF http://elibrary.imf.org/view/journals/001/2014/116/001.2014.issue-116-en.xml IMF e-Library