Suchergebnisse

"This essay shows that government credit-allocation schemes generate incentive conflicts that undermine the quality of bank supervision and eventually produce banking crisis. For political reasons, most countries establish a regulatory culture that embraces three economically contradictory elements: politically directed subsidies to selected bank borrowers; subsidized provision of explicit or implicit repayment guarantees for the creditors of banks that participate in the credit-allocation scheme; and defective government monitoring and control of the subsidies to leveraged risk-taking that the other two elements produce. In 2007-2008, technological change and regulatory competition simultaneously encouraged incentive-conflicted supervisors to outsource much of their due discipline to credit-rating firms and encouraged banks to securitize their loans in ways that pushed credit risks on poorly underwritten loans into corners of the universe where supervisors and credit-ratings firms would not see them"--National Bureau of Economic Research web site

"Considered as a social contract, a financial safety net imposes duties and confers rights on different sectors of the economy. Within a nation, elements of incompleteness inherent in this contract generate principal-agent conflicts that are mitigated by formal agreements, norms, laws, and the principle of democratic accountability. Across nations, additional layers of incompleteness emerge that are hard to moderate. This paper shows that nationalistic biases and leeway in principles used to measure value-at-risk and bank capital make it unlikely that the crisis-prevention and crisis-resolution schemes incorporated in Basel II and EU Directives could allocate losses imbedded in troubled institutions efficiently or fairly across member nations"--National Bureau of Economic Research web site