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Agency problems and goal conflicts

  • Robert A. Eisenbeis

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.

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Paper provided by Federal Reserve Bank of Atlanta in its series FRB Atlanta Working Paper with number 2004-24.

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Date of creation: 2004
Date of revision:
Handle: RePEc:fip:fedawp:2004-24
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  1. Richard Dale, 2000. "Deposit Insurance in Theory and Practice," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
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  8. Edward J. Kane, 1987. "Who should learn what from the failure and delayed bailout of the ODGF?," Proceedings 162, Federal Reserve Bank of Chicago.
  9. 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.
  10. 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.
  11. Robert R. Bliss, 2003. "Bankruptcy law and large complex financial organizations: a primer," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q I, pages 48-58.
  12. 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.
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  15. Edward J. Kane, 1988. "Changing incentives facing financial-services regulators," Proceedings, Federal Reserve Bank of Cleveland, pages 265-279.
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