In the early 1990s, after decades of high inflation and financial repression, Argentina embarked on a course of macroeconomic and bank regulatory reform. Bank regulatory policy promoted privatization, financial liberalization, and free entry, limited safety net support, and established a novel...

This paper studies the impact of technological change and regulatory competition on governmental efforts to generate rents for banks in two stylized regulatory environments. In the first environment, incentive-conflicted regulators attempt to create rents by restricting the size and scope of...

Banks are in the business of taking calculated risks. Expanding the geographic footprint of an organization's profit-making activities changes the geographic pattern of its exposure to loss in ways that are hard for regulators and supervisors to observe. This paper tests and confirms the...

This essay shows that government credit-allocation schemes generate incentive conflicts that undermine the quality of bank supervision and eventually produce banking crisis. For political reasons, most countries establish a regulatory culture that embraces three economically contradictory...

Financial safety nets are incomplete social contracts that assign responsibility to various economic sectors for preventing, detecting, and paying for potentially crippling losses at financial institutions. This paper uses the theories of incomplete contracts and sequential bargaining to...

Regulation consists of rulemaking and enforcement. Economic theory offers two complementary rationales for regulating financial institutions. Altruistic public-benefits theories treat rules as governmental instruments for increas- ing fairness and efficiency across society as a whole....

The regulation of bank capital as a means of smoothing the credit cycle is a central element of forthcoming macro-prudential regimes internationally. For such regulation to be effective in controlling the aggregate supply of credit it must be the case that: (i) changes in capital requirements...

This paper supplies an agency-cost and contestable-markets perspective on the financial policies that triggered the Asian financial crisis. The agency-cost analysis hypothesizes that individual-country regulators knew that politically directed loans had made their banks insolvent, but...