Bank Capital and the Crisis

In a fantastic example of intra-ESADE academic collaboration, I have just completed a trilogy of papers on the uber critical theme of bank capital regulation. Together with Vasiliki Kosmidou (who just graduated from the MSc in Finance program), we conducted in-depth empirical analysis of the types of regulatory capital requirements (Basel Committtee) that large international banks were facing on their trading activities before, during, and after the 2007-2008 crisis. Bluntly stated, these banks were running vast trading positions with essentially no capital (i.e. it was essentially all being financed via debt, and very short-term debt at that).
No wonder then that these institutions collapsed at once and very fast. If you have no capital and your assets sink just a bit, you are insolvent. Given how toxic many of those trading assets were, it is easy to appreciate how exposed the system was.
You can find the papers at http://www.esade.edu/ftmba/eng/academics/finance-lab/publications

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