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The pricing of bank debt guarantees

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  • Arping, Stefan

Abstract

We analyze the desirability of fair pricing of government guarantees for bank liabilities. Fair pricing is desirable only if the banking sector is sufficiently transparent. In opaque banking systems, fair pricing may exacerbate banks' incentive to take excessive risks.

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File URL: http://www.sciencedirect.com/science/article/B6V84-5017HC5-1/2/87b7ef76d3192fb85be8c21594d6907f
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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 108 (2010)
Issue (Month): 2 (August)
Pages: 119-121

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Handle: RePEc:eee:ecolet:v:108:y:2010:i:2:p:119-121

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Web page: http://www.elsevier.com/locate/ecolet

Related research

Keywords: Bank debt guarantees Fair pricing Transparency Financial stability;

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References

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  1. Freixas, Xavier & Rochet, Jean-Charles, 1998. "Fair pricing of deposit insurance. Is it possible? Yes. Is it desirable? No," Research in Economics, Elsevier, vol. 52(3), pages 217-232, September.
  2. Kevin C. Murdock & Thomas F. Hellmann & Joseph E. Stiglitz, 2000. "Liberalization, Moral Hazard in Banking, and Prudential Regulation: Are Capital Requirements Enough?," American Economic Review, American Economic Association, vol. 90(1), pages 147-165, March.
  3. Morrison, Alan & White, Lucy, 2004. "Is Deposit Insurance A Good Thing, And If So, Who Should Pay for It?," CEPR Discussion Papers 4424, C.E.P.R. Discussion Papers.
  4. Boyd, John H. & Chang, Chun & Smith, Bruce D., 2002. "Deposit insurance: a reconsideration," Journal of Monetary Economics, Elsevier, vol. 49(6), pages 1235-1260, September.
  5. Yuk-Shee Chan & Stuart I. Greenbaum & Anjan V. Thakor, 2004. "Is Fairly Priced Deposit Insurance Possible?," Finance 0411018, EconWPA.
  6. Blum, Jurg M., 2002. "Subordinated debt, market discipline, and banks' risk taking," Journal of Banking & Finance, Elsevier, vol. 26(7), pages 1427-1441, July.
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Cited by:
  1. Zaghini, Andrea, 2014. "Bank bonds: Size, systemic relevance and the sovereign," CFS Working Paper Series 454, Center for Financial Studies (CFS).

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