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Prudential Supervision: Why Is It Important and What Are the Issues?

In: Prudential Supervision: What Works and What Doesn't

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  • Frederic S. Mishkin

Abstract

This paper outlines what problems asymmetric information creates for the financial system and shows and shows that the presence of asymmetric information explains why banks are so important. The paper then goes on to explain why prudential supervision of these institutions is needed, and what forms it takes. The paper ends by outlining the key issues in the design of prudential supervision and uses them to organize a general discussion of the papers in this conference volume, providing a brief overview of their content. The linkages between these papers are explored, which highlights some general conclusions.

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  • Frederic S. Mishkin, 2001. "Prudential Supervision: What Works and What Doesn't," NBER Books, National Bureau of Economic Research, Inc, number mish01-1, October.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 10756.

    Handle: RePEc:nbr:nberch:10756

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    1. Berger, Allen N & Udell, Gregory F, 1995. "Relationship Lending and Lines of Credit in Small Firm Finance," The Journal of Business, University of Chicago Press, vol. 68(3), pages 351-81, July.
    2. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 84(3), pages 488-500, August.
    3. Giancarlo Corsetti & Paolo Pesenti & Nouriel Roubini, 1998. "What Caused the Asian Currency and Financial Crisis?," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 343, Bank of Italy, Economic Research and International Relations Area.
    4. Diamond, Douglas W, 1984. "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 51(3), pages 393-414, July.
    5. repec:fth:inadeb:320 is not listed on IDEAS
    6. Peek, Joe & Rosengren, Eric, 1995. "Bank regulation and the credit crunch," Journal of Banking & Finance, Elsevier, Elsevier, vol. 19(3-4), pages 679-692, June.
    7. Gande, Amar & Puri, Manju & Saunders, Anthony, 1999. "Bank entry, competition, and the market for corporate securities underwriting," Journal of Financial Economics, Elsevier, Elsevier, vol. 54(2), pages 165-195, October.
    8. Frederic S. Mishkin, 1990. "Asymmetric Information and Financial Crises: A Historical Perspective," NBER Working Papers 3400, National Bureau of Economic Research, Inc.
    9. Anil K. Kashyap & Raghuram Rajan & Jeremy C. Stein, 2002. "Banks as Liquidity Providers: An Explanation for the Coexistence of Lending and Deposit-Taking," Journal of Finance, American Finance Association, American Finance Association, vol. 57(1), pages 33-73, 02.
    10. Liliana Rojas-Suárez & Steven R. Weisbrod, 1996. "Building Stability in Latin American Financial Markets," Research Department Publications, Inter-American Development Bank, Research Department 4028, Inter-American Development Bank, Research Department.
    11. Allen N. Berger & Anil K. Kashyap & Joseph Scalise, 1995. "The Transformation of the U.S. Banking Industry: What a Long, Strange Trip It's Been," Center for Financial Institutions Working Papers, Wharton School Center for Financial Institutions, University of Pennsylvania 96-06, Wharton School Center for Financial Institutions, University of Pennsylvania.
    12. Allen N. Berger & Gregory F. Udell, 1994. "Did risk-based capital allocate bank credit and cause a "credit crunch" in the United States?," Proceedings, Federal Reserve Bank of Cleveland, Federal Reserve Bank of Cleveland, pages 585-633.
    13. Kroszner, Randall S. & Rajan, Raghuram G., 1997. "Organization structure and credibility: Evidence from commercial bank securities activities before the Glass-Steagall Act," Journal of Monetary Economics, Elsevier, Elsevier, vol. 39(3), pages 475-516, August.
    14. John H. Boyd & Mark Gertler, 1993. "U.S. Commercial Banking: Trends, Cycles, and Policy," NBER Chapters, in: NBER Macroeconomics Annual 1993, Volume 8, pages 319-377 National Bureau of Economic Research, Inc.
    15. Allen Berger & Timothy Hannan, 1994. "The Efficiency Cost of Market Power in the Banking Industry: A Test of the 'Quiet Life' and Related Hypotheses," Center for Financial Institutions Working Papers, Wharton School Center for Financial Institutions, University of Pennsylvania 94-29, Wharton School Center for Financial Institutions, University of Pennsylvania.
    16. Bernanke, Ben S, 1983. "Nonmonetary Effects of the Financial Crisis in Propagation of the Great Depression," American Economic Review, American Economic Association, American Economic Association, vol. 73(3), pages 257-76, June.
    17. Mishkin, Frederic S., 1999. "Lessons from the Asian crisis," Journal of International Money and Finance, Elsevier, Elsevier, vol. 18(4), pages 709-723, August.
    18. Stiglitz, Joseph E & Weiss, Andrew, 1983. "Incentive Effects of Terminations: Applications to the Credit and Labor Markets," American Economic Review, American Economic Association, American Economic Association, vol. 73(5), pages 912-27, December.
    19. Franklin R. Edwards & Frederic S. Mishkin, 1995. "The Decline of Traditional Banking: Implications for Financial Stabilityand Regulatory Policy," NBER Working Papers 4993, National Bureau of Economic Research, Inc.
    20. Flannery, Mark J, 1998. "Using Market Information in Prudential Bank Supervision: A Review of the U.S. Empirical Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 30(3), pages 273-305, August.
    21. Gande, Amar, et al, 1997. "Bank Underwriting of Debt Securities: Modern Evidence," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 10(4), pages 1175-1202.
    22. Keeley, Michael C, 1990. "Deposit Insurance, Risk, and Market Power in Banking," American Economic Review, American Economic Association, American Economic Association, vol. 80(5), pages 1183-1200, December.
    23. Puri, Manju, 1994. "The long-term default performance of bank underwritten security issues," Journal of Banking & Finance, Elsevier, Elsevier, vol. 18(2), pages 397-418, January.
    24. Petersen, Mitchell A & Rajan, Raghuram G, 1994. " The Benefits of Lending Relationships: Evidence from Small Business Data," Journal of Finance, American Finance Association, American Finance Association, vol. 49(1), pages 3-37, March.
    25. Ben S. Bernanke & Cara S. Lown, 1991. "The Credit Crunch," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(2), pages 205-248.
    26. Frederic S. Mishkin, 1996. "Understanding Financial Crises: A Developing Country Perspective," NBER Working Papers 5600, National Bureau of Economic Research, Inc.
    27. Hancock, Diana & Laing, Andrew J. & Wilcox, James A., 1995. "Bank capital shocks: Dynamic effects on securities, loans, and capital," Journal of Banking & Finance, Elsevier, Elsevier, vol. 19(3-4), pages 661-677, June.
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