This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Should banks be capitalized?

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Douglas W. Diamond

Additional information is available for the following registered author(s):

Abstract

When a bank is a relationship lender, its financial health affects its borrowers’ access to credit. If regulators or depositors might close a bank, it will take any action necessary to remain open. This leads to excessive foreclosure of the bank’s relationship-based loans or to the bank’s inability to collect existing loans due to its fear of accounting losses if it forecloses. Recapitalization of banks possessing relationship-based loans can be good policy. However, providing a positive but too small amount of capital can be worse than providing none. There is no reason to provide subsidized capital to banks without relationship-based loans.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help file. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.richmondfed.org/publications/economic_research/economic_quarterly/pdfs/fall2001/diamond.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Article provided by Federal Reserve Bank of Richmond in its journal Economic Quarterly.

Volume (Year): (2001)
Issue (Month): Fall ()
Pages: 71-96
Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Handle: RePEc:fip:fedreq:y:2001:i:fall:p:71-96

Contact details of provider:
Web page: http://www.richmondfed.org/
More information through EDIRC

Order Information:
Email:
Web: http://www.richmondfed.org/publications/

For technical questions regarding this item, or to correct its listing, contact: (Diane Rosenberger).

Related research
Keywords: Bank capital Bank supervision Banks and banking

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Diamond, Douglas-W, 2001. "Should Japanese Banks Be Recapitalized?," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 19(2), pages 1-19, May. [Downloadable!]
  2. Douglas W. Diamond & Raghuram G. Rajan, 2001. "Liquidity Risk, Liquidity Creation, and Financial Fragility: A Theory of Banking," Journal of Political Economy, University of Chicago Press, vol. 109(2), pages 287-327, April. [Downloadable!] (restricted)
    Other versions:
  3. Takatoshi Ito & Yuri Nagataki Sasaki, 1998. "Impacts of the Basle Capital Standard on Japanese Banks' Behavior," Discussion Paper Series a356, Institute of Economic Research, Hitotsubashi University.
    Other versions:
  4. Hiroshi Nakaso, 1999. "Recent banking sector reforms in Japan," Economic Policy Review, Federal Reserve Bank of New York, issue Jul, pages 1-7. [Downloadable!]
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Gary Gorton & Lixin Huang, 2002. "Liquidity, Efficiency and Bank Bailouts," Center for Financial Institutions Working Papers 02-33, Wharton School Center for Financial Institutions, University of Pennsylvania. [Downloadable!]
    Other versions:
  2. John P. Harding & Xiaozhing Liang & Stephen L. Ross, 2007. "The Optimal Capital Structure of Banks: Balancing Deposit Insurance, Capital Requirements and Tax-Advantaged Debt," Working papers 2007-29, University of Connecticut, Department of Economics, revised Feb 2008. [Downloadable!]
Statistics
Access and download statistics

Did you know? You too can volunteer with RePEc.

This page was last updated on 2008-9-27.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.