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Agency problems and goal conflicts

Author

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  • Robert A. Eisenbeis

Abstract

Agency theory is used to evaluate how the European Union (EU) may deal with the resolution of goal and agency conflicts in dealing with failing financial institutions. Experience in the United States suggests that the financial and regulatory structure being put in place, which relies upon country-sponsored deposit insurance funds and home country responsibility for supervision and lender-of-last-resort functions, is not likely to be robust to the failure of a large EU institution that threatens the solvency of the deposit insurance fund or that poses systemic risk. The author concludes that the EU needs a centralized and common approach to dealing with troubled institutions.

Suggested Citation

  • Robert A. Eisenbeis, 2004. "Agency problems and goal conflicts," FRB Atlanta Working Paper 2004-24, Federal Reserve Bank of Atlanta.
  • Handle: RePEc:fip:fedawp:2004-24
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    References listed on IDEAS

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    1. Honohan, Patrick & Klingebiel, Daniela, 2003. "The fiscal cost implications of an accommodating approach to banking crises," Journal of Banking & Finance, Elsevier, vol. 27(8), pages 1539-1560, August.
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    3. Asli Demirgüç-Kunt & Edward J. Kane, 2004. "Deposit Insurance: Handle with Care," Central Banking, Analysis, and Economic Policies Book Series,in: Luis Antonio Ahumada & J. Rodrigo Fuentes & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.), Banking Market Structure and Monetary Policy, edition 1, volume 7, chapter 12, pages 345-358 Central Bank of Chile.
    4. Robert A. Eisenbeis & Larry D. Wall, 2002. "Reforming deposit insurance and FDICIA," Economic Review, Federal Reserve Bank of Atlanta, issue Q1, pages 1-16.
    5. Kane, Edward J, 1977. "Good Intentions and Unintended Evil: The Case against Selective Credit Allocation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 9(1), pages 55-69, February.
    6. Kane, Edward J., 2003. "What kind of multinational deposit-insurance arrangements might best enhance world welfare?," Pacific-Basin Finance Journal, Elsevier, vol. 11(4), pages 413-428, September.
    7. Dirk Schoenmaker & Sander Oosterloo, 2005. "Financial Supervision in an Integrating Europe: Measuring Cross-Border Externalities," International Finance, Wiley Blackwell, vol. 8(1), pages 1-27, July.
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    9. Edward J. Kane, 1988. "Changing incentives facing financial-services regulators," Proceedings, Federal Reserve Bank of Cleveland, pages 265-279.
    10. Armen Hovakimian & Edward Kane & Luc Laeven, 2003. "How Country and Safety-Net Characteristics Affect Bank Risk-Shifting," Journal of Financial Services Research, Springer;Western Finance Association, vol. 23(3), pages 177-204, June.
    11. Prati, A. & Schinasi, G.J., 1999. "Financial Stability in European Economic and Monetary Union," Princeton Studies in International Economics 86, International Economics Section, Departement of Economics Princeton University,.
    12. Edward J. Kane, 1987. "Who should learn what from the failure and delayed bailout of the ODGF?," Proceedings 162, Federal Reserve Bank of Chicago.
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    Cited by:

    1. Rungporn Roengpitya, 2008. "The Effects of Financial Deregulation on Bank Governance: The Panel Data Evidence of the 1990s," Working Papers 2008-08, Monetary Policy Group, Bank of Thailand.
    2. Frisell, Lars & Roszbach, Kasper & spagnolo, giancarlo, 2008. "Governing the Governors: A Clinical Study of Central Banks," Working Paper Series 221, Sveriges Riksbank (Central Bank of Sweden).
    3. Santiago Carbo-Valverde & Edward Kane & Francisco Rodriguez-Fernandez, 2008. "Evidence of Differences in the Effectiveness of Safety-Net Management in European Union Countries," Journal of Financial Services Research, Springer;Western Finance Association, vol. 34(2), pages 151-176, December.
    4. Holopainen, Helena, 2007. "Integration of financial supervision," Research Discussion Papers 12/2007, Bank of Finland.
    5. Gerhardt, Maria & Lannoo, Karel, 2011. "Options for reforming deposit protection schemes in the EU," ECRI Papers 4339, Centre for European Policy Studies.
    6. David G. Mayes, 2009. "Optimal Structures for Financial Regulation and Supervision," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 7(2), pages 7-12, 07.

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