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...

EU financial safety nets are social contracts that assign uncertain benefits and burdens to taxpayers in different member countries. To help national officials to assess their taxpayers' exposures to loss from partner countries, this paper develops a way to estimate how well markets and...