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Who Should Act as Lender of Last Resort? An Incomplete Contracts Model: A Comment

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  • Kahn, Charles M.
  • Santos, Joao A. C.

Abstract

Researchers have pointed out that conflicts between the objectives of different bank regulators necessitate careful design of the institutional allocation of regulatory authority. In doing this, however, they often assume that regulators have incentives to share their private information regarding regulated banks. Our paper shows that the very same considerations that lead bank regulators to make different policy choices render the information-sharing assumption invalid. We further show that this result has important implications for the institutional allocation of lending of last resort, deposit insurance, and bank supervision.

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File URL: http://dx.doi.org/10.1353/mcb.2006.0057
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Bibliographic Info

Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 38 (2006)
Issue (Month): 4 (June)
Pages: 1111-1118

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Handle: RePEc:mcb:jmoncb:v:38:y:2006:i:4:p:1111-1118

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

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Cited by:
  1. Ralf Bebenroth & Diemo Dietrich & Uwe Vollmer, 2007. "Bank regulation and supervision in Japan and Germany: A comparison," Discussion Paper Series 211, Research Institute for Economics & Business Administration, Kobe University.
  2. Boyer, Pierre C. & Ponce, Jorge, 2012. "Regulatory capture and banking supervision reform," Journal of Financial Stability, Elsevier, vol. 8(3), pages 206-217.
  3. Xavier Freixas, 2009. "Monetary policy in a systemic crisis," Economics Working Papers 1200, Department of Economics and Business, Universitat Pompeu Fabra.
  4. Xavier Freixas & Bruno Maria Parigi, 2008. "Lender of Last Resort and Bank Closure Policy," CESifo Working Paper Series 2286, CESifo Group Munich.
  5. Jorge Ponce & Marc Rennert, 2012. "Systemic banks and the lender of last resort," Documentos de Trabajo (working papers) 1812, Department of Economics - dECON.
  6. Matej Marinc & Razvan Vlahu, 2011. "The Economic Perspective of Bank Bankruptcy Law," DNB Working Papers 310, Netherlands Central Bank, Research Department.
  7. Ponce, Jorge, 2010. "Lender of last resort policy: What reforms are necessary?," Journal of Financial Intermediation, Elsevier, vol. 19(2), pages 188-206, April.
  8. Hauck, Achim & Vollmer, Uwe, 2013. "Emergency liquidity provision to public banks: Rules versus discretion," European Journal of Political Economy, Elsevier, vol. 32(C), pages 193-204.
  9. Marco A Espinosa-Vega & Rafael Matta & Charles M. Kahn & Juan Sole, 2011. "Systemic Risk and Optimal Regulatory Architecture," IMF Working Papers 11/193, International Monetary Fund.

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