Working Paper
On the Measurement of Large Financial Firm Resolvability
Jarque, Arantxa; Walter, John R.; Evert, Jackson (2018-03-02)
We say that a large financial institution is "resolvable" if policymakers would allow it to go through unassisted bankruptcy in the event of failure. The choice between bankruptcy or bailout trades off the higher loss imposed on the economy in a potentially disruptive resolution against the incentive for excessive risk-taking created by an assisted resolution or a bailout. The resolution plans ("living wills") of large financial institutions contain information needed to evaluate this trade-off. In this paper, we propose a tool to complement the living will review process: an impact score ...
Working Paper , Paper 18-6

Journal Article
Firewalls
Walter, John R. (1996-10)
Economic Quarterly , Issue Fall , Pages 15-39

Journal Article
Top performing small banks: making money the old-fashioned way
Walter, John R.; Gup, Benton E. (1989-11)
Although the profitability of U.S. small banks shrank in the 1980s, two percent of these banks remained highly profitable by emphasizing basic banking, namely acquiring low-cost funds and making low-risk investments.
Economic Review , Volume 75 , Issue Nov , Pages 23-35

Journal Article
Were bank examiners too strict with New England and California banks?
Walter, John R.; Darin, Robert (1994-10)
Economic Quarterly , Issue Fall , Pages 25-47

Journal Article
Can a safety net subsidy be contained?
Walter, John R. (1998-01)
Economic Quarterly , Issue Win , Pages 1-20

Briefing
Can orderly liquidation solve the problems of bailouts and bankruptcies?
Walter, John R.; Pellerin, Sabrina; Nash, Betty Joyce (2012-09)
In response to the financial crisis of 2007?09, Congress created the Orderly Liquidation Authority (OLA), a new regime for winding down systemically important financial institutions (SIFIs) that become troubled. The OLA provisions address two conflicting goals: mitigating threats to the financial system associated with bankruptcy and minimizing moral hazard associated with government bailouts. This Economic Brief compares OLA provisions to bankruptcy procedures. Although the OLA process could be quicker and more flexible than bankruptcy, it may not limit systemic risk without increasing moral ...
Richmond Fed Economic Brief , Issue Sep

Working Paper
Did the Financial Reforms of the Early 1990s Fail? A Comparison of Bank Failures and FDIC Losses in the 1986-92 and 2007-13 Periods
Walter, John R.; Prescott, Edward Simpson; Balla, Eliana (2015-05-15)
Two of the most significant banking reforms to come out of the banking problems in the late 1980s and early 1990s were the increase in capital requirements from Basel 1 and the prompt corrective action (PCA) provisions of the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA). The PCA provisions require regulators to shut down banks before book capital becomes negative. We compare failures and FDIC losses on commercial banks in the pre-FDICIA commercial bank crisis of the mid-1980s to early 1990s with that in the recent financial crisis. Using a sample of community and ...
Working Paper , Paper 15-5

Briefing
Understanding the New Liquidity Coverage Ratio Requirements
Sablik, Timothy; Walter, John R.; House, Mark (2016-01)
In 2014, U.S. financial regulators introduced new liquidity coverage ratio requirements for qualified banking institutions. This regulation, based on guidelines from the Basel III accord, requires that banks hold minimum levels of liquid assets to withstand a period of financial stress. It is a response to the financial crisis of 2007?08, during which many banks found themselves suddenly cut off from short-term funding. But the impact of liquidity requirements remains an area of ongoing debate and economic research.
Richmond Fed Economic Brief , Issue Jan

Journal Article
Orderly liquidation authority as an alternative to bankruptcy
Walter, John R.; Pellerin, Sabrina (2012-01)
In response to the financial crisis of 2007, Congress created the Orderly Liquidation Authority (OLA) as part of its overarching financial regulatory reform bill, the Dodd-Frank Act. The OLA's provisions are aimed at simultaneously addressing two conflicting goals---mitigating systemic risk, which is thought to emerge when large financial firms enter the bankruptcy process, while also minimizing moral hazard, which arises when investors believe that firms are likely to be granted a government bailout to save them from bankruptcy and prevent systemic problems. In this article, we review the ...
Economic Quarterly , Volume 98 , Issue 1Q , Pages 1-31

Briefing
Identifying systemically important financial institutions
Price, David A.; Walter, John R. (2011-04)
The Dodd-Frank Act, in addressing systemic risks to the financial system, requires federal regulators to extend a variety of requirements to nonbank financial institutions that are deemed "systemically important." But how can regulators, and the institutions themselves, best determine whether an institution is systemically important? Research in this area has generated a number of potential approaches.
Richmond Fed Economic Brief , Issue Apr