When bigger isn’t better: Bail outs and bank behaviour
AbstractThe traditional theory of commercial banking explains maturity transformation and liquidity provision assuming no asymmetric information and no excess profits. It captures the possibility of bank runs and business cycle risk; but it ignores the moral hazard problems connected with risk-taking by large banks counting on state bail outs. In this paper market concentration and risk-shifting is incorporated in an analytically tractable fashion; and the modified framework is used to consider measures to restore competition and stability--including, in particular, those recommended for the UK by the Independent Commission on Banking (2011), chaired by Sir John Vickers.
Download InfoIf 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8602.
Date of creation: Oct 2011
Date of revision:
Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
Find related papers by JEL classification:
- E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-10-22 (All new papers)
- NEP-BAN-2011-10-22 (Banking)
- NEP-CBA-2011-10-22 (Central Banking)
- NEP-CIS-2011-10-22 (Confederation of Independent States)
- NEP-CTA-2011-10-22 (Contract Theory & Applications)
- NEP-MAC-2011-10-22 (Macroeconomics)
- NEP-REG-2011-10-22 (Regulation)
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.:
- Dell'Ariccia, Giovanni & Marquez, Robert, 2004. "Information and bank credit allocation," Journal of Financial Economics, Elsevier, vol. 72(1), pages 185-214, April.
- Marcheggiano, Gilberto & Miles, David K & Yang, Jing, 2011.
"Optimal Bank Capital,"
CEPR Discussion Papers
8333, C.E.P.R. Discussion Papers.
- Inklaar, R. & Colangelo, A., 2010. "Banking sector output measurement in the euro area â€“ a modified approach," GGDC Research Memorandum GD-117, Groningen Growth and Development Centre, University of Groningen.
- Nicola Gennaioli & Andrei Shleifer, 2009.
"What Comes to Mind,"
NBER Working Papers
15084, National Bureau of Economic Research, Inc.
- Roberto Chang & Andrés Velasco, 2001. "A Model Of Financial Crises In Emerging Markets," The Quarterly Journal of Economics, MIT Press, vol. 116(2), pages 489-517, May.
- 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.
- Bhattacharya, Sudipto, 1982. " Aspects of Monetary and Banking Theory and Moral Hazard," Journal of Finance, American Finance Association, vol. 37(2), pages 371-84, May.
- Nicola Gennaioli & Andrei Shleifer & Robert Vishny, 2010.
"Financial Innovation and Financial Fragility,"
2010.114, Fondazione Eni Enrico Mattei.
- repec:cge:warwcg:134 is not listed on IDEAS
- Powell, Andrew & Maier, Antonia & Miller, Marcus, 2012. "Prudent Banks and Creative Mimics: Can we tell the difference?," CAGE Online Working Paper Series 76, Competitive Advantage in the Global Economy (CAGE).
- Miller, Marcus & Zhang, lei, 2013. "The Invisible Hand and the Banking Trade: Seigniorage, Risk-shifting and More," CAGE Online Working Paper Series 135, Competitive Advantage in the Global Economy (CAGE).
- repec:cge:warwcg:75 is not listed on IDEAS
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
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.