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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...
Persistent link: https://www.econbiz.de/10012465955
Under the New Basel Accord bank capital adequacy rules (Pillar 1) are substantially revised but the introduction of two …
Persistent link: https://www.econbiz.de/10012467010
monetary policy. The theory unifies an endogenous supply of illiquid local loans and risk-sharing among subsidiaries of bank …
Persistent link: https://www.econbiz.de/10012456534
The 1990s emerging-markets crises were characterized by sudden reversals in inflows of foreign capital followed by unusually large declines in current account deficits, private expenditures, production, and prices of nontradable goods relative to tradables. This paper shows that these Sudden...
Persistent link: https://www.econbiz.de/10012470386
We study a modification of the Diamond and Dybvig (1983) model in which the bank may hold a liquid asset, some … depositors see sunspots that could lead them to run, and all depositors have incomplete information about the bank's ability to … survive a run. The incomplete information means that the bank is not automatically incentivized to always hold enough liquid …
Persistent link: https://www.econbiz.de/10012456621
Now in prospect is a major revision of international bank capital regulations that would embody recent advances in … increase in bank failure rates over time …
Persistent link: https://www.econbiz.de/10012471142
Although nation-based systems of financial regulation constitute a second-best approach to global welfare maximization, treacherous accountability problems must be acknowledged and resolved before regulatory cooperation can deal fairly and efficiently with cross-border issues. To track and...
Persistent link: https://www.econbiz.de/10012466806
As financial institutions and markets transact more and more cross-border business, gaps and flaws in national safety nets become more consequential. Because citizens of host (home) countries may be made to pay for mistakes made in the home (host) country, Basel's lead-regulator paradigm...
Persistent link: https://www.econbiz.de/10012466813
Limited liability and asymmetric information between an investment bank and its lenders provide an incentive for a bank …
Persistent link: https://www.econbiz.de/10012470046
Managers' incentives may conflict with those of shareholders or creditors, particularly at leveraged, opaque banks. Bankers may abuse their control rights to give themselves excessive salaries, favored access to credit, or to take excessive risks that benefit themselves at the expense of...
Persistent link: https://www.econbiz.de/10012458857