Download Capital Markets and Financial Intermediation by Colin Mayer (editor), Xavier Vives (editor) PDF

By Colin Mayer (editor), Xavier Vives (editor)

Monetary intermediation is at present a topic of lively educational study on either side of the Atlantic. ecu monetary integration increases significant coverage concerns in regards to the hazards of banking festival and the proper law of banks and different monetary intermediaries. the alternative of Anglo-American vis-à-vis Continental eu varieties of monetary markets can be important to japanese Europe's transformation. This quantity includes theoretical papers on the leading edge of educational examine that make clear banking and protection markets and banking festival.

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This impoverishes the bank and makes its claim-holders even more prone to let the managers gamble for resurrection than in the absence of ratings. Furthermore, spontaneous recapitalization is not desired by shareholders because it amounts to a gift to debt-holders. Private deposit insurance Private insurance resembles the use of ratings. Both raise the bank's cost of deposits in the event of bad signals. And both create a private monitor that substitutes for small depositors. One difference between the two is that the insurer has direct monetary incentives while the rating agency 32 Mathias Dewatripont and Jean Tirole tries to preserve its reputational capital.

And P. Bolton (1992) 'An "incomplete contract" approach to bankruptcy and the financial structure of the firm', Review of Economic Studies 59, forthcoming. W. and G. Gorton (1991) The origins of banking panics', in G. ), Financial Markets and Financial Crises, Chicago: University of Chicago Press. Dewatripont, M. and J. Tirole (1992) 'A theory of debt and equity: diversity of securities and manager-shareholder congruence', mimeo, Universite Libre, Brussels, and IDEI, Toulouse. Diamond, D. (1984) 'Financial intermediation and delegated monitoring', Review of Economic Studies 51, 393-414.

It may exacerbate the 'winner's curse' problem that afflicts financial markets (Riordan). It may reduce the profitability of banks and exacerbate the risks of financial failure discouraging reputation building in the presence of flat-rate deposit insurance (Boot and Greenbaum). Of these, the risk to the financial system is probably the most immediate cause of concern both for European integration and for US restructuring of the banking industry. In Europe, banking systems are being integrated faster than bank regulation is being coordinated.

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