Managerial Prudence under Banking Regulation

Konferenzbeitrag

This article provides a theoretical framework to analyze the impact of banking regulation on the risk-taking behavior of banks by incorporatig the incentives of three risk-neutral agents - the welfaristic regulator, the shareholder and the manager. While shareholders are assumed to maximize the discounted flow of bank profits, bank managers maximize expected income choosing from a menu of portfolios with different risk-return profiles. We show under which conditions capital requirements intensify the agency conflict between shareholders and bank managers if complete contracts are impossible. As a result, a government interested in alleviating this divergence will incorporate capital requirements to curb risk-appetite only in those cases in which managerial myopia and the probability of default in the banking-sector are not substantial. Moreover, our model suggests that direct regulation of a manager's bonus system is a substitute for any form of capital requirements.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie - Session: Banking Regulation: Liquidity and Regulatory Capital ; No. A7-V3

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Financial Institutions and Services: Government Policy and Regulation ; Corporate Finance and Governance: Government Policy and Regulation ; Corporate Finance and Governance: General
• Thema: Subprime Crisis ; Banking regulation

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Buck, Florian
• Ereignis: Veröffentlichung
• (wer): Verein für Socialpolitik
• (wo): Frankfurt a. M.
• (wann): 2010

Weitere Informationen

• Handle: http://hdl.handle.net/10419/37204
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ