The path between financial meltdown and moral hazard in banking is, at best, narrow and impervious. During the financial crisis, public support became the standard response to save the banks in difficulty, heightening and broadening the moral hazard issue: subordinated/senior debt holders and...

It has been argued that higher capital requirements are not expensive for the banking system, by exploiting a renewed edition of a standard argument from corporate finance, the Modigliani-Miller theorem (1958 and 1963). However, the M&M model must be carefully analysed before endorsing the...

In the international discussion about the change of the supervisory system, the strength of the approaches defined in Italy must be emphasized. If the model based on the board of statutory auditors could not be exported, some of the main characteristics could be preserved and replicated. The...

Following bank failures in 1974, notably in Germany (Bankhaus Herstatt of Cologne on June 16) and the US (Franklin National Bank of New York on October 8), the Central Bank Governors of the G10 countries decided to set up a Committee at the BIS in Basel to improve quality and enhance the...