This paper surveys the theory of banking regulation from the general perspective of regulatory theory. Starting by considering the different justifications of financial intermediation, we proceed to identify the market failures that make banking regulation necessary. We then turn to examine how...

This paper analyzes current practices at U.S. banks for quantifying credit in retail portfolios and examines the challenges confronting banks and regulators in developing an internal ratings based (IRB) approach to setting capital requirements for retail exposures. The paper finds that...

This paper derives the optimal size of the financial sector using a general equilibrium framework that is an extension of Holmstrom and Tirole's 1997 paper. We show that the financial sector has a unique optimal size relative to the size of the economy as a whole. Creating and maintaining this...

The past decade has seen dramatic losses in the banking industry. Firms that had been performing well suddenly announce large losses due to credit exposures that turn sour, interest rate positions taken, or derivative exposures that may or may not have been assumed to hedge balance sheet risk....

This paper analyzes the difficulties associated with bank regulation and deposit insurance in a unified Europe. Specifically, the consequences of the Second Coordinating Banking Directive and the quot;common passportquot; branching regulation are explored. Issues of deposit insurance premiums...

Through the past year, on-site visits to financial service firms were conducted by a team of researchers from the Wharton Financial Institutions Center to review and evaluate their risk management systems. In the insurance sector, this evaluation covered a number of prominent life/health and...

This paper investigates the demand by households for transaction services from the financial sector. Households buy several goods with any of several media of exchange. The households choose the medium of exchange to use for each type of good, how much of each type of medium to hold, and the...