Capital movements, asset values, and banking policy in globalized markets
Weaknesses in banking systems are rooted in government credit-allocation preferences that prove unsupportable in private markets. Losses that preferential loans impose on lending banks and on the governmental safety net can be covered up for awhile, but not indefinitely. A silent run begins when sophisticated depositors recognize that assets in the country's combined banking and deposit-insurance system cannot cover the claims of bank depositors without being supplemented by substantial injections of funds from domestic or foreign taxpayers. Longstanding banking-system weakness devolves into a countrywide economic crisis when and as doubts about the government's willingness to force taxpayers to support an economically insolvent banking system are spread by an escalating silent run.' Financial crises become more frequent, but also shallower when foreign-bank presence and activities are expanded. Offshore banks put the supervisory systems and safety-net guarantees of their homelands into competition with those of host countries. Intensified offshore banking competition provides substitutes for deposits in local banks. These substitutes make it easier for host-country depositors to test the local guarantee system by quietly fleeing to quality. In effect, banking crises discipline inefficient and unfair regulatory systems and push the social burdens created by weak supervisory systems toward the levels found in best-practices countries.
(This abstract was borrowed from another version of this item.)
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||1998|
|Date of revision:|
|Publication status:||Published in Conference on Bank Structure and Competition (1998 : 34th) ; Payments systems in the global economy : risks and opportunitie.|
|Contact details of provider:|| Postal: P.O. Box 834, 230 South LaSalle Street, Chicago, Illinois 60690-0834|
Web page: http://www.chicagofed.org/
More information through EDIRC
|Order Information:|| Web: http://www.chicagofed.org/webpages/publications/print_publication_order_form.cfm Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Michael P. Dooley, 1998.
"A model of crises in emerging markets,"
International Finance Discussion Papers
630, Board of Governors of the Federal Reserve System (U.S.).
- Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 311-25, August.
- 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.
- Claessens, Stijn & Demirguc-Kunt, Asl[iota] & Huizinga, Harry, 2001. "How does foreign entry affect domestic banking markets?," Journal of Banking & Finance, Elsevier, vol. 25(5), pages 891-911, May.
When requesting a correction, please mention this item's handle: RePEc:fip:fedhpr:606. 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: (Bernie Flores)
If references are entirely missing, you can add them using this form.