Bank runs, and capital adequacy
What is it about?
Why do bank runs happen? The usual view is that this is a liquidity problem. However, this paper shows that the basic problem lies in inadequate capital with banks.
Why is it important?
During the financial crisis, the importance of capital adequacy (and limited leverage) has been realised. See, for example, the book by Admati and Hellwig (2013). However, long before all this, my paper (with S Gangopadhyay) showed how capital adequacy is critical.
The following have contributed to this page: Gurbachan Singh