Seventh Edition - The Addison-Wesley Series in Economics Phần 5 pot

and contagion effect payoff method purchase and assumption method all CHAPTER 11 Economic Analysis of Banking Regulation 261 Moral Hazard and the Government Safety Net. 262 PART III Financial Institutions Box 1: Global The Spread of Government Deposit Insurance Throughout the World: Is This a Good Thing? Finance for Growth: Policy Choices in a Volatile World Adverse Selection and the Government Safety Net. “Too Big to Fail.” CHAPTER 11 Economic Analysis of Banking Regulation 263 Financial Consolidation and the Government Safety Net. Restrictions on Asset Holdings and Bank Capital Requirements 264 PART III Financial Institutions NBER Macroeconomics Annual Bank Supervision: Chartering and Examination CHAPTER 11 Economic Analysis of Banking Regulation 265 CAMELS rating cease and desist orders 266 PART III Financial Institutions Box 2: Global Basel 2: Is It Spinning Out of Control? call reports Assessment of Risk Management CHAPTER 11 Economic Analysis of Banking Regulation 267 Disclosure Requirements 268 PART III Financial Institutions Study Guide Restrictions on Competition Consumer Protection CHAPTER 11 Economic Analysis of Banking Regulation 269 [...]... Problems in Regulating International Banking Summary CHAPTER 11 Economic Analysis of Banking Regulation The 1980s U.S Banking Crisis: Why? Number of Bank Failures 2 25 200 1 75 150 1 25 100 75 50 25 0 19 35 1940 19 45 1 950 1 955 1960 19 65 1970 19 75 1980 19 85 1990 19 95 2000 20 05 F I G U R E 1 Bank Failures in the United States, 1934–2002 Source: 273 274 PART III Financial Institutions Early Stages of the Crisis... will further engage in the insurance business, thus blurring the distinction between insurance companies and banks Insurance Management Insurance, like banking, is in the financial intermediation business of transforming one type of asset into another for the public Insurance providers use the premiums paid on policies to invest in assets such as bonds, stocks, mortgages, and other loans; the earnings... in the size of the life insurance industry relative to other financial intermediaries, with their share of total financial intermediary assets falling from 19.6% at the end of 1960 to 11 .5% at the end of 1980 (See Table 1, which shows the relative shares of financial intermediary assets for each of the financial intermediaries discussed in this chapter.) Beginning in the mid-1970s, life insurance companies... 10 has increased the importance of nonbank finance and is blurring the distinction between different financial institutons This chapter examines in more detail how institutions engaged in nonbank finance operate, how they are regulated, and recent trends in nonbank finance Insurance www.iii.org The Insurance Information Institute publishes facts and statistics about the insurance industry Life Insurance... decreases their incentives to take on excessive risk However, more could be done to improve the incentives for banks to limit their risk taking Yet eliminating deposit insurance and the too-big-to-fail policy altogether may be going too far, because these proposals might make the banking system too prone to a banking panic Ch a p ter 12 PREVIEW Nonbank Finance Banking is not the only type of financial intermediation... discipline by uninsured depositors These critics advocate eliminating the too-big-to-fail policy entirely, thereby decreasing the incentives of big banks to take on too much risk Evaluating FDICIA and Other Proposed Reforms of the Banking Regulatory System 2 However, other experts do not believe that depositors are capable of monitoring banks and imposing discipline on them The basic problem with reducing... understanding of the material in this chapter FDICIA’s reduction of the scope of deposit insurance by limiting insurance on brokered deposits and restricting the use of the too-big-to-fail policy might have increased the incentives for uninsured depositors to monitor banks and to withdraw funds if the bank is taking on too much risk Because banks might now fear the loss of deposits when they engage in risky... PART III Financial Institutions Box 3: E-Finance Electronic Banking: New Challenges for Bank Regulation Table 1 Major Banking Legislation in the United States in the Twentieth Century (continues) CHAPTER 11 Economic Analysis of Banking Regulation Table 1 Major Banking Legislation in the United States in the Twentieth Century (continued) 271 272 PART III Financial Institutions International Banking Regulation... of the Comptroller of the Currency (OCC), have also encouraged banks to enter the insurance field because getting into insurance would help diversify banks’ business, thereby improving their economic health and making bank failures less likely For example, in 1990, the OCC ruled that selling annuities was a form of investment that was incidental to the banking business and so was a permissible banking... they might have less incentive to take on too much risk Limitations on the use of the too-big-to-fail policy starting in 1992 have resulted in increased losses to uninsured depositors at failed banks as planned Although the cited elements of FDICIA strengthen the incentive of depositors to monitor banks, some critics of FDICIA would take these limitations on the scope of deposit insurance even further . 1934–2002 Source: 19 35 1940 19 45 1 950 1 955 1960 19 65 1970 19 75 1980 19 85 1990 19 95 2000 20 05 0 50 25 75 100 150 200 Number of Bank Failures 1 25 1 75 2 25 highly leveraged transaction loans Early Stages of the Crisis 274. Analysis of Banking Regulation 271 Table 1 Major Banking Legislation in the United States in the Twentieth Century (continued) International Banking Regulation Summary Problems in Regulating International Banking 272. PART III Financial Institutions Electronic Banking: New Challenges for Bank Regulation Box 3: E-Finance Table 1 Major Banking Legislation in the United States in the Twentieth Century (continues) CHAPTER