Mankart, JochenJochenMankart2023-04-132023-04-132013https://www.alexandria.unisg.ch/handle/20.500.14171/90253We use individual U.S. commercial bank balance sheet information to develop stylized facts about bank behavior in both the cross section and over time. We then build a quant- itative model of bank behavior taking as exogenous inputs the aggregate and idiosyncratic components of problem loans, interest rate spreads and deposit shocks, seeking to under- stand decisions regarding new loans provision, access to wholesale funding and defaults. The model generates highly procyclical loan supply and banks can curtail new lending very ag- gressively in response to background risk shocks, such as an increase in bad loans. Bank failures, though, are strongly countercyclical. Relative to a baseline recession, in a reces- sion simultaneously accompanied by a temporary freeze in the money market, bank defaults increase by a factor of three and credit supply drops by 2.5 percentage points more.enBankingLeverageUninsurable RiskCapital AdequacyBank FailuresQuantitative Modelsworking paper