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The introduction of Central Bank Digital Currency (CBDC) could represent a deep structural change to the financial sector, and in particular to the banking sector. This paper proposes a Deep Neural Network (DNN) design to model the introduction of CBDC and its potential impact on commercial banks’ deposits. The model proposed forecasts the likelihood of the occurrence of bank runs as a function of the system characteristics and of the intrinsic features of CBDC. The success rate of CBDC and the impact on the banking sector is highly dependent on its design. Whether CBDC should carry any form of interest, if the amount of CBDC should be capped by account or if convertibility from banks’ deposits should be guaranteed by commercial banks are important features to consider. Further, the design of CBDC needs to contribute to enhancing the sustainability of the financial system, hence a CBDC design that promotes financial inclusion is paramount. The model is initially calibrated with Euro area system data. Results show that an increase in the financial system risk perception would trigger a significant transfer of wealth from bank deposits to CBDC, while the wealth transfer to CBDC is to a lesser extent also sensitive to its interest rate.

We study a model where limited liability and enforcement permits bank owners to shift the risk of their asset portfolios to the depositors. Incentive-compatible equilibria require the franchise value of the bank to exceed the value that the bank owners can obtain by undertaking excessively risky investments, and defaulting on deposits when investment returns are low. Our model generates multiple stationary equilibria as well as chaotic equilibria that can lead to coordination failures, making bank runs, bank defaults, and banking crises more likely. We suggest that banking regulations, including leverage limits, central bank credit policies, as well as restrictions on bank size and deposit rate ceilings can be instituted not only to enhance stable franchise values and sound asset portfolios, but also to eliminate multiple and complex equilibria.

We develop an infinite horizon macroeconomic model of banking that allows for liquidity mismatch and bank runs. Whether a bank run equilibrium exists depends on bank balance sheets and an endogenous liquidation price for bank assets. While in normal times a bank run equilibrium may not exist, the possibility can arise in recessions. A run leads to a significant contraction in intermediation and aggregate economic activity. Anticipations of a run have harmful effects on the economy even if the run does not occur. We illustrate how the model can shed light on some key aspects of the recent financial crisis.

This paper presents a new database on the timing of systemic banking crises and policy responses to resolve them. The database covers the universe of systemic banking crises for the period 1970-2007, with detailed data on crisis containment and resolution policies for 42 crisis episodes, and also includes data on the timing of currency crises and sovereign debt crises. The database extends and builds on the Caprio, Klingebiel, Laeven, and Noguera (2005) banking crisis database, and is the most complete and detailed database on banking crises to date.

While managing liquidity, each bank should be prepared also for unexpected and exceptional events, such as bank runs. The aim of this paper is therefore to determine the maximum volume of deposits that can be withdrawn from individual banks operating in the Visegrad countries and to identify the determinants of their sensitivity to a bank run. The data cover the period from 2000 to 2014. Although bank liquidity, measured by the liquid asset ratio, decreased in all countries during the analyzed period, the level of liquidity differs among countries. We have simulated a bank run as a sudden withdrawal of 20% of client deposits. The ability of individual banks to survive this crisis scenario significantly differs. Nevertheless, as Czech and Hungarian banks were more liquid, they are better prepared for a potential bank run than Polish and Slovak banks. After that, using the panel data regression analysis, we tested seven bank-specific factors and seven macroeconomic factors. The sensitivity of commercial banks from the Visegrad countries to a possible bank run is determined mainly by different aspects of bank liquidity (not only the level of bank liquidity, but also connection to bank lending activity, the way of its financing and also activity on the inter-bank market). Among the other bank specific factors, profitability, capital adequacy and size of the banks are relevant in some countries. When it comes to macroeconomic factors, interest rate and unemployment rate are important. However, we can conclude that the most important factor is the level of bank liquidity: banks with a sufficient buffer of liquid assets are safer than other banks, particular during periods of financial distress.

We develop a structural empirical model of the US banking sector. Insured depositors and run-prone uninsured depositors choose between differentiated banks. Banks compete for deposits and endogenously default. The estimated demand for uninsured deposits declines with banks' financial distress, which is not the case for insured deposits. We calibrate the supply side of the model. The calibrated model possesses multiple equilibria with bank-run features, suggesting that banks can be very fragile. We use our model to analyze proposed bank regulations. For example, our results suggest that a capital requirement below 18 percent can lead to significant instability in the banking system.

This paper demonstrates that, even if depositors are fully rational and always choose the Pareto-dominant equilibrium when there are multiple equilibria, a bank run may still occur when depositors' expectations on the bank's fundamentals do not change. More specifically, a bank run may occur when depositors learn that noisy bank-specific information will be revealed, or when they learn that precise bank-specific information will not be revealed. The results in this paper are consistent with the empirical evidence about bank runs. It also implies that suspension of convertibility can improve the efficiency of bank runs.

Many empirical studies of banking crises have employed \"banking crisis\" (BC) indicators constructedusing primarily information on government actions undertaken in response to bank distress. Weformulate a simple theoretical model of a banking industry which we use to identify and constructtheory-based measures of systemic bank shocks (SBS). Using both country-level and firm-level samples, we show that SBS indicators consistently predict BC indicators based on four major BCseries that have appeared in the literature. Therefore, BC indicatorsactually measure lagged government responses to systemic bank shocks, rather than the occurrence of crises per se. We re-examine the separate impact of macroeconomic factors, bank market structure, deposit insurance, andexternal shocks on the probability of a systemic bank shocks and on the probability of governmentresponses to bank distress. The impact of these variables on the likelihood of a government responseto bank distress is totally different from that on the likelihood of a systemic bank shock.Disentangling the effects of systemic bank shocks and government responses turns out to be crucial inunderstanding the roots of bank fragility. Many findings of a large empirical literature need to be re-assessed and/or re-interpreted.

In episodes of significant banking distress or perceived systemic risk to the financial system, policymakers have often opted for issuing blanket guarantees on bank liabilities to stop or avoid widespread bank runs. In theory, blanket guarantees can prevent bank runs if they are credible. However, guarantee could add substantial fiscal costs to bank restructuring programs and may increase moral hazard going forward. Using a sample of 42 episodes of banking crises, this paper finds that blanket guarantees are successful in reducing liquidity pressures on banks arising from deposit withdrawals. However, banks' foreign liabilities appear virtually irresponsive to blanket guarantees. Furthermore, guarantees tend to be fiscally costly, though this positive association arises in large part because guarantees tend to be employed in conjunction with extensive liquidity support and when crises are severe.