Fairly Priced Deposit Insurance, Incentive Compatible Regulations, and Bank Asset Choices
This article provides incentive compatible regulations that support feirly priced deposit insurance in a competitive banking industry. If informational asymmetry exists between the regulator and banks regarding loan quality, but the regulator can observe actual loan rates charged, then imposing a ca...
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| Veröffentlicht in: | The Geneva Papers on Risk and Insurance Theory 1996-06, Vol.21 (1), p.123-141 |
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| container_end_page | 141 |
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| container_issue | 1 |
| container_start_page | 123 |
| container_title | The Geneva Papers on Risk and Insurance Theory |
| container_volume | 21 |
| creator | YOON, SUK HEUN MAZUMDAR, SUMON C. |
| description | This article provides incentive compatible regulations that support feirly priced deposit insurance in a competitive banking industry. If informational asymmetry exists between the regulator and banks regarding loan quality, but the regulator can observe actual loan rates charged, then imposing a capital requirement schedule that leads market loan rates to decrease in loan quality is shown to be incentive compatible. Competition in the loan market induces banks to be indifferent to all loans that satisfy a minimum acceptable quality and reject all riskier loans. The regulator could reduce the banking industry's riskiness by imposing stricter capital requirements that increase this minimum quality. |
| doi_str_mv | 10.1007/BF00949053 |
| format | Article |
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| fulltext | fulltext |
| identifier | ISSN: 0926-4957 |
| ispartof | The Geneva Papers on Risk and Insurance Theory, 1996-06, Vol.21 (1), p.123-141 |
| issn | 0926-4957 1554-964X 1573-6954 1554-9658 |
| language | eng |
| recordid | cdi_proquest_miscellaneous_839051462 |
| source | JSTOR Archive Collection A-Z Listing; RePEc; Business Source Complete; SpringerNature Journals |
| subjects | Asymmetric information Bank assets Bank capital Bank loans Bank markets Banking industry Banking regulation Banks Capital requirements Deposit insurance Financial assets Financial risks Insurance Insurance regulation Loan rates Regulation Risk management |
| title | Fairly Priced Deposit Insurance, Incentive Compatible Regulations, and Bank Asset Choices |
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