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BANK RENTS AND UNCERTAINTY. A Legacy of the Subjectivists

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Listed:
  • Yasushi Suzuki

    (Department of Economics, SOAS University of London, UK)

Abstract

Is it possible to bail Japan out of its lingering financial slump by the means of transition to an Anglo-American financial system and a convergence to Basel pragmatism? This paper argues that the imprudent convergence to an Anglo-American type management in credit risks without the preconditions for diversifying risks and uncertainty have problematically encouraged herd behaviors in lending by the Japanese banks. This paper also sheds light on the understated role of bank rents, which contributed to mediating financial resources to new industries and to pooling monitoring skills within banks. The ill-planned transition may have lost Japan the important components of the traditional “rent-based†monitoring system, which Japan should have reserved in alternative forms. One of these components was the role of transferring rents for incubating new enterprises. The other was giving lenders the incentive and time for developing what we call a relation-based non-algorithmic monitoring style.

Suggested Citation

  • Yasushi Suzuki, 2002. "BANK RENTS AND UNCERTAINTY. A Legacy of the Subjectivists," Working Papers 123, Department of Economics, SOAS University of London, UK.
    • Handle: RePEc:soa:wpaper:123
    as

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    File URL: https://www.soas.ac.uk/sites/default/files/2022-10/economics-wp123.pdf
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    References listed on IDEAS

    as
    1. Dore, Ronald, 2000. "Stock Market Capitalism: Welfare Capitalism: Japan and Germany versus the Anglo-Saxons," OUP Catalogue, Oxford University Press, number 9780199240616, Decembrie.
    2. Davis, E. Philip, 1995. "Debt, Financial Fragility, and Systemic Risk," OUP Catalogue, Oxford University Press, number 9780198233312, Decembrie.
    3. Mr. Sunil Sharma & Sushil Bikhchandani, 2000. "Herd Behavior in Financial Markets: A Review," IMF Working Papers 2000/048, International Monetary Fund.
    4. Yasushi Suzuki, 2001. "The Crisis of Financial Intermediation, Understanding Japan’s Lingering Economic Stagnation," Working Papers 116, Department of Economics, SOAS University of London, UK.
    5. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Banking; Japan; Herding; Risk Management;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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