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How Offshore Financial Competition Disciplines Exit Resistance by Incentive-Conflicted Bank Regulators

  • Edward Kane

This paper studies the impact of technological change and regulatory competition on governmental efforts to generate rents for banks in two stylized regulatory environments. In the first environment, incentive-conflicted regulators attempt to create rents by restricting the size and scope of individual banking organizations. In the second, rents come from efforts to supply deposit guarantees to troubled banks. In both cases, innovations in financial technology and in competing domestic and offshore regulatory arrangements make the costs of delivering rents to banks more transparent to taxpayers and encourage customers to push rent-dependent banking systems into crisis. This analysis portrays the banking crises that have roiled world markets in recent years as information-producing events that identify and discredit inefficient strategies of regulating banking markets.

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File URL: http://hdl.handle.net/10.1023/A:1008152728068
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Article provided by Springer in its journal Journal of Financial Services Research.

Volume (Year): 16 (1999)
Issue (Month): 2 (December)
Pages: 265-291

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Handle: RePEc:kap:jfsres:v:16:y:1999:i:2:p:265-291
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=102934

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  1. Kane, Edward J, 1996. "De Jure Interstate Banking: Why Only Now?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(2), pages 141-61, May.
  2. Larry D. Wall & Robert A. Eisenbeis, 1999. "Financial regulatory structure and the resolution of conflicting goals," FRB Atlanta Working Paper No. 99-12, Federal Reserve Bank of Atlanta.
  3. Becker, Gary S, 1983. "A Theory of Competition among Pressure Groups for Political Influence," The Quarterly Journal of Economics, MIT Press, vol. 98(3), pages 371-400, August.
  4. Dooley, Michael P, 2000. "A Model of Crises in Emerging Markets," Economic Journal, Royal Economic Society, vol. 110(460), pages 256-72, January.
  5. Stiglitz, Joseph E, 1996. "Some Lessons from the East Asian Miracle," World Bank Research Observer, World Bank Group, vol. 11(2), pages 151-77, August.
  6. Claessens, Stijn & Demirguc-Kunt, Asli & Huizinga, Harry, 1998. "How does foreign entry affect the domestic banking market?," Policy Research Working Paper Series 1918, The World Bank.
  7. Wagster, John D, 1996. " Impact of the 1988 Basle Accord on International Banks," Journal of Finance, American Finance Association, vol. 51(4), pages 1321-46, September.
  8. Edward J. Kane, 1991. "Financial Regulation and Market Forces," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 127(III), pages 325-342, September.
  9. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
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