Who Should Act as Lender of Last Resort? An Incomplete Contracts Model: A Comment
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.
Volume (Year): 38 (2006)
Issue (Month): 4 (June)
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