Advanced Search
MyIDEAS: Login

Safety and soundness of financial intermediaries: capital requirements, deposit insurance, and monetary policy

Contents:

Author Info

  • Richard W. Kopcke
Registered author(s):

    Abstract

    More than two-thirds of the $25 trillion of financial assets held in the United States is managed on behalf of investors by financial intermediaries, ranging from trusts, mutual funds, and mortgage pools to insurance companies, pension funds, and banks. Because of their importance, governments have long regulated the activities of these intermediaries to ensure sound financial markets, a foundation of secure economic development. Currently, regulators both here and abroad are considering reforms that not only might foster more efficient domestic financial markets, but also might prepare the way for more equitable global markets.> When not all investors are fully informed about the prospective returns on all assets, the cost of funds for financial intermediaries depends on savers' state of confidence in their investments. Because the regulations that govern intermediaries affect the price of risk in financial markets and because this influence varies with economic conditions, the actions of regulators, like those of the monetary authority, may need to adjust with economic conditions in order to foster the prudent valuation of assets. The prompt enforcement of fixed, risk-based capital requirements, for example, might diminish the ability of financial intermediaries to cope with economic shocks. Because capital ratios measure neither the insurance inherent in intermediaries' balance sheets nor the capacity of this insurance to contend with different risks, more revealing assessments of the safety and soundness of intermediaries should consider how their earnings and cash flows might change with economic conditions.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.bostonfed.org/economic/neer/neer1995/neer695d.htm
    Download Restriction: no

    File URL: http://www.bostonfed.org/economic/neer/neer1995/neer695d.htm
    Download Restriction: no

    Bibliographic Info

    Article provided by Federal Reserve Bank of Boston in its journal New England Economic Review.

    Volume (Year): (1995)
    Issue (Month): Nov ()
    Pages: 37-65

    as in new window
    Handle: RePEc:fip:fedbne:y:1995:i:nov:p:37-65

    Contact details of provider:
    Postal: 600 Atlantic Avenue, Boston, Massachusetts 02210
    Phone: 617-973-3397
    Fax: 617-973-4221
    Email:
    Web page: http://www.bos.frb.org/
    More information through EDIRC

    Order Information:
    Email:

    Related research

    Keywords: Deposit insurance ; Financial institutions ; Monetary policy;

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:fip:fedbne:y:1995:i:nov:p:37-65. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Catherine Spozio).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.