IDEAS home Printed from https://ideas.repec.org/a/cai/reldbu/rel_712_0193.html
   My bibliography  Save this article

La Politique de Dette Subordonnée comme alternative au IIIe Pilier de Bâle II : est-elle faisable ?

Author

Listed:
  • Adrian Pop

Abstract

Mandatory Sub-Debt Policy as an alternative to the Third Pillar of Basel II : Is it feasible ?, by Adrian Pop The recent proposals of reform put forward by the Bank for International Settlements and the Federal Reserve System include specific elements of market discipline that are naturally added to the traditional tools of banking regulation and supervision. More precisely, a mandatory Sub-Debt Policy by which certain large and sophisticated banking organizations are forced to issue some minimum amount of subordinated debt on a regular basis, can prove itself effective in mitigating moral hazard and regulatory forbearance in banking industry. In this article, we provide some interesting and useful insights into the incentives structure of sub-debt holders by using a standard framework for option pricing applied to the banking firm. In particular, under `normal' conditions of bank solvability the subordinated creditors act indeed as natural `allies' of regulators, mitigating the risk taking incentives of bank shareholders. On the contrary, as the bank approaches its default point, they may exacerbate the moral hazard problems and complicate the tasks of supervisory authorities. In this second case, the sub-debt holders behave in fact as `enemies' of the government supervisor. Finally, we derive some major policy implications in terms of market discipline and optimal bank regulation design. Journal of Economic Literature classification numbers : G21, G28.

Suggested Citation

  • Adrian Pop, 2005. "La Politique de Dette Subordonnée comme alternative au IIIe Pilier de Bâle II : est-elle faisable ?," Recherches économiques de Louvain, De Boeck Université, vol. 71(2), pages 193-222.
  • Handle: RePEc:cai:reldbu:rel_712_0193
    as

    Download full text from publisher

    File URL: http://www.cairn.info/load_pdf.php?ID_ARTICLE=REL_712_0193
    Download Restriction: free

    File URL: http://www.cairn.info/revue-recherches-economiques-de-louvain-2005-2-page-193.htm
    Download Restriction: free

    More about this item

    Keywords

    bank capital standards; market discipline; subordinated debt;

    JEL classification:

    • 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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cai:reldbu:rel_712_0193. 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: (Jean-Baptiste de Vathaire). General contact details of provider: http://www.cairn.info/revue-recherches-economiques-de-louvain.htm .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.