We present a theory of banking regulation affecting procedural compliance in monitoring collateral in secured debt … contracts. The theory suggests an externality which creates a gap between the socially optimal level of monitoring and the bank …’s privately optimal level. Banks can not be punished ex post for lack of monitoring or otherwise in the bad state of nature. Hence …

successful implementation of the (two fold) topics of discussion of this paper, namely, monitoring and liquidity risk … measurements. The importance of successfully communicating results obtained from monitoring and measuring such risks, and the role …

effective corporate governance systems are essential in facilitating high levels of monitoring, accountability and disclosure …