Abstract
We study the interaction between bank payouts and creditors' rollover decisions in a dynamic model where a public liquidity facility can temporarily replace funding withdrawn by non-rolling creditors. We solve the model in closed form and characterize how shareholders' payout policy and creditors' rollover behavior are jointly determined in equilibrium and vary with the reliability of liquidity support. A more reliable facility encourages debt rollover but also induces earlier payouts and smaller buffers, partially offsetting its stabilizing effect. We show that dividend restrictions counteract this feedback, reducing rollover risk and increasing firm value. Their effectiveness is nonmonotonic in the facility reliability, while the optimal restriction becomes less stringent as reliability increases. When recapitalization is endogenous, however, sufficiently tight restrictions eliminate incentives to recapitalize, limiting how aggressively payouts can be restricted.