Market Valuations of Banks Increase Risk of Contagious Financial Crises
The article discusses how financial regulations after the 2008 crisis focused on improving capital and liquidity in banks to prevent and recover from crises. However, it suggests that these reforms did not address how to limit damage once a panic starts. The researchers found that banks with more liquidity and capital were actually more exposed to panic, and banks' business models are becoming more similar, increasing the risk of a contagious run.