my thesis consists of three chapters on the financial stability of large banks. In the first chapter, I describe a model with a banking system in which the deposit bank collects deposits from households and lends them to the investment bank, and the investment bank provides funds to companies. A severe economic downturn may lead to the defaults of both banks. Since deposits are provided by the government, the expected loss on deposits has to be compensated by the government. I size the model and quantify the expected loss on stressed deposits. In the second chapter, I develop a new methodology to measure the capital deficit of commercial banks in the event of a market slowdown. The measure, which I call stress expected losses (SEL), is defined as the difference between the market value of the active agents in the stress scenario and the book value of the bank’s deposits and short-term debt. I estimate the probability of default and the SEL of the 31 largest commercial banks in the United States between 1996 and 2016. The probability of failure in a declining market reached on average up to 25 % between 2008 and 2012, and is close to 5 % in 2016. Salt was very high (between $250 billion and $350 billion) during the subprime crisis and is close to $200 billion in 2016. In the third chapter, I look at the credit risk premiums of major international banks. My conclusions are divided into three parts: (1) I show that the credit risk premium represents two thirds of the total default risk price since the financial crisis, (2) that premium was negative until the financial crisis but increased dramatically. (3) I summarise that the bank’s ability to bear the risk entails the risk premium on the credit market. In other words, investors in the credit market demand a premium for the rolling risk due to the bank’s leverage growth. Abstract My dissertation consists of three captions on financial stability of large banks. In the first chapter I draft a general model with a banking system in which the deposit bank deposits from households and the merchant bank originate from funds to firms. Merchant banks Borrow collateralised short-term funds from deposit banks. In an economic downturn, as the value of collateral losses, the merchant bank must sell assets on short notice, reducing the crisis, and defaults if its cash buffer is insufficient. The deposit bank suffers from losses of the depressed assets. If the value of the deposit bank’s assets is insufficient to cover deposits, it also defaults. Deposits are driven by the govently, with a premium paid by the deposit bank equal to its expected loss on the deposits. I define the bank’s capital shortfall in the crisis as the expected loss on deposits under stress. I CALIBRATE the model on the U.S. economy and show how this measure of stressed expected loss behaves for different calibrations of the model. A 40 % decline of the securities market would result in a loss of 12.5 % in the ex-ante value of deposits. In the second chapter I develop a new methodology to measure the capital shortfall of commercial banks during a market downturn. The measure, which I call stressed expected loss (SEL), adopts the structure of the individual bank’s balance sheet. Salt is defined as the difference between the market value of assets in the stress scenario and the book value of the deposits and short-term debt of the bank. I estimate the likelihood of default and the SEL of the 31 large commercial banks in the U.S. between 1996 and 2016. The probability of default in a market downturn was as high as 25 %, on average, between 2008 and 2012. It is now much lower and closed to 5 %, on average. Salt was very high (between $250 and $350 billion) during the subprime crisis. In 2016, it is closed to $200 trillion. In the third chapter I study credit risk premia of large international banks. Credit risk premium is defined as the credit spread net of an estimate of default risk. My findings are threefold: (1) 1 how that credit risk premium accounts for two-thirds of the total price of default risk since the financial crisis, (2) this premium had been negative just before the financial crisis but then pink dramatically and further thought high enough, and (3) I document that risk bearing capacity of the bank drives the risk premium in the credit market. This is, investors in the credit market demand a premium for bearing risk due to the leverage growth of the bank. These findings are with the theories that relate the risk premia to the health of the financial sector. Furthermore, potential risk factors related to the bank, default swap market, macroeconomic condition, and regulatory environment not eliminating the premium earned by the average.