The principal–agent problem between the regulator, regulated banks, and taxpayers is critical to the viability of the financial system's safety net. There exists the danger that the regulator will collude with regulated banks to pursue their benefits at the expense of taxpayers, thereby...

This paper investigates how the human relationship prevailing between the regulatory authorities and private banks referred to as "amakudari" has influenced the effectiveness of prudential regulation in Japan. We propose a simple model of repeated game to explain the amakudari phenomenon. Our...

Banks are recognized as playing an important role of monitoring borrowers, thereby reducing the agency costs associated with informational asymmetry. However, there remains an issue "who could monitor the banks", because it is difficult for outsiders to monitor banks' management. In particular,...