It is difficult to design and implement an effective safety net for banks, because overgenerous protection of banks may introduce a risk-enhancing moral hazard and destabilize the very system it is meant to protect. The safety net that policymakers design must provide the right mix of market and...

Next to technological progress and deregulation, theintroduction of the euro is widely considered to be an importantcatalyst for bank consolidation in Europe. In order to assessthe public policy issues surrounding bank mergers, this paperanalyzes the efficiency effects of 52 horizontal bank...