The paper analyses the relationship between deposit insurance, debt-holder monitoring, and risk taking. In a stylised … banking model we show that deposit insurance may reduce moral hazard, if deposit insurance credibly leaves out non … deposit insurance may serve as a commitment device to limit the safety net and permit monitoring by uninsured subordinated …

When people share risk in financial markets, intermediaries provide costly enforcement for most trades and, hence, are … an integral part of financial marketsu0092 organization. We assess the degree of risk sharing that can be achieved … allow for optimal risk sharing as long as markets are complete, default is prevented in equilibrium and intermediaries …