Reputational contagion and optimal regulatory forbearance

This paper examines common regulation as cause of interbank contagion. Studies based on the correlation of bank assets and the extent of interbank lending may underestimate the likelihood of contagion because they do not incorporate the fact that banks have a common regulator. In our model, the failure of one bank can undermine the public’s confidence in the competence of the banking regulator, and hence in other banks chartered by the same regulator. Thus depositors may withdraw funds from their, unconnected, banks. The optimal regulatory response to this ‘panic’ behaviour can be to privately exhibit forbearance to the initially failing bank in the hope that it - and hence other vulnerable banks - survives. By contrast, public bailouts are ineffective in preventing panics and must be bolstered by other measures such as increased deposit insurance coverage. Regulatory transparency improves confidence ex ante but impedes regulators’ ability to stem panics ex post. JEL Classification: G21, G28Bank Regulation, Contagion, Reputation

Interbank comptetition with costly screening

We analyse credit market equilibrium when banks screen loan applicants. When banks have a convex cost function of screening, a pure strategy equilibrium exists where banks optimally set interest rates at the same level as their competitors. This result complements Broecker’s (1990) analysis, where he demonstrates that no pure strategy equilibrium exists when banks have zero screening costs. In our set up we show that interest rate on loans are largely independent of marginal costs, a feature consistent with the extant empirical evidence. In equilibrium, banks make positive profits in our model in spite of the threat of entry by inactive banks. Moreover, an increase in the number of active banks increases credit risk and so does not improve credit market effciency: this point has important regulatory implications. Finally, we extend our analysis to the case where banks have differing screening abilities.Interbank Competition, Screening, Credit Risk, Adverse Selection

Regulating Financial Conglomerates

We analyse a model of financial intermediation in which intermediaries are subject to moral hazard and they do not invest socially optimally, because they ignore the systemic costs of failure and, in the case of banks, because they fail to account for risks which are assumed by the deposit insurance fund. Capital adequacy requirements are designed to minimise the social costs of these effects. We show that banks should always have higher regulatory capital requirements than insurance companies. Contrary to received wisdom, when banks and insurance companies combine to form financial conglomerates we show that it is socially optimal to separate their balance sheets. Moreover, the practice of "regulatory arbitrage", or of transfering assets from one balance sheet to another, is welfare increasing.

Bank liquidity, bank lending, and "bad bank" policies

Why are bank deposits demandable when they are also negotiable? We present a General Equilibrium model in which demandable debt exposes banks to liquidity risk so that they can signal their types and ensure that their liabilities can circulate as a means of payment. Banks can manage their liquidity risk by altering their deposit rate and their lending scale. When banks are transparent, so that depositors have homogenous information about their assets, they use only the former tool: their lending scale is effcient, and they do not experience liquidity crisis. When banks are opaque, so that depositors receive private signals of their quality, they ineffciently shrink the scale of their lending. A bank's stock of liquid assets affects its capacity for risk taking. A "bad bank" policy can resolve liquidity crises by reducing the opacity of the bank's assets

Definition of Nonresponse to Analgesic Treatment of Arthritic Pain: An Analytical Literature Review of the Smallest Detectable Difference, the Minimal Detectable Change, and the Minimal Clinically Important Difference on the Pain Visual Analog Scale

Our objective was to develop a working definition of nonresponse to analgesic treatment of arthritis, focusing on the measurement of pain on the 0–100 mm pain visual analog scale (VAS). We reviewed the literature to assess the smallest detectable difference (SDD), the minimal detectable change (MDC), and the minimal clinically important difference (MCID). The SDD for improvement reported in three studies of rheumatoid arthritis was 18.6, 19.0, and 20.0. The median MDC was 25.4 for 7 studies of osteoarthritis and 5 studies of rheumatoid arthritis (calculated for a reliability coefficient of 0.85). The MCID increased with increasing baseline pain score. For baseline VAS tertiles defined by scores of 30–49, 50–65, and >65, the MCID for improvement was, respectively, 7–11 units, 19–27 units, and 29–37 units. Nonresponse can thus be defined in terms of the MDC for low baseline pain scores and in terms of the MCID for high baseline scores

Increased expression of a microRNA correlates with anthelmintic resistance in parasitic nematodes

Resistance to anthelmintic drugs is a major problem in the global fight against parasitic nematodes infecting humans and animals. While previous studies have identified mutations in drug target genes in resistant parasites, changes in the expression levels of both targets and transporters have also been reported. The mechanisms underlying these changes in gene expression are unresolved. Here, we take a novel approach to this problem by investigating the role of small regulatory RNAs in drug resistant strains of the important parasite Haemonchus contortus. microRNAs (miRNAs) are small (22 nt) non-coding RNAs that regulate gene expression by binding predominantly to the 3′ UTR of mRNAs. Changes in miRNA expression have been implicated in drug resistance in a variety of tumor cells. In this study, we focused on two geographically distinct ivermectin resistant strains of H. contortus and two lines generated by multiple rounds of backcrossing between susceptible and resistant parents, with ivermectin selection. All four resistant strains showed significantly increased expression of a single miRNA, hco-miR-9551, compared to the susceptible strain. This same miRNA is also upregulated in a multi-drug-resistant strain of the related nematode Teladorsagia circumcincta. hco-miR-9551 is enriched in female worms, is likely to be located on the X chromosome and is restricted to clade V parasitic nematodes. Genes containing predicted binding sites for hco-miR-9551 were identified computationally and refined based on differential expression in a transcriptomic dataset prepared from the same drug resistant and susceptible strains. This analysis identified three putative target mRNAs, one of which, a CHAC domain containing protein, is located in a region of the H. contortus genome introgressed from the resistant parent. hco-miR-9551 was shown to interact with the 3′ UTR of this gene by dual luciferase assay. This study is the first to suggest a role for miRNAs and the genes they regulate in drug resistant parasitic nematodes. miR-9551 also has potential as a biomarker of resistance in different nematode species

Condensation properties of stress granules and processing bodies are compromised in Myotonic Dystrophy Type 1

RNA regulation in mammalian cells requires complex physical compartmentalisation, using structures thought to be formed by liquid-liquid phase separation. Disruption of these structures is implicated in numerous degenerative diseases. Myotonic dystrophy type 1 (DM1) is a multi-systemic trinucleotide repeat disorder resulting from an expansion of nucleotides CTG (CTGexp) in the DNA encoding DM1 protein kinase (DMPK). The cellular hallmark of DM1 is the formation of nuclear foci that contain expanded DMPK RNA (CUGexp) (with thymine instead of uracil). We report here the deregulation of stress granules (SGs) and processing bodies (P-bodies), two cytoplasmic structures key for mRNA regulation, in cell culture models of DM1. Alterations to the rates of formation and dispersal of SGs suggest an altered ability of cells to respond to stress associated with DM1, while changes to the structure and dynamics of SGs and P-bodies suggest that a widespread alteration to the biophysical properties of cellular structures is a consequence of the presence of CUGexp RNA.</p