Bank of Finland Research Discussion Papers
Title | Bank of Finland Research Discussion Papers PDF eBook |
Author | Suomen Pankki |
Publisher | |
Pages | |
Release | 2005 |
Genre | Finance |
ISBN |
Bank of Finland Discussion Papers
Title | Bank of Finland Discussion Papers PDF eBook |
Author | |
Publisher | |
Pages | 294 |
Release | 2004 |
Genre | Banks and banking |
ISBN |
Bank of Finland Discussion Papers
Title | Bank of Finland Discussion Papers PDF eBook |
Author | |
Publisher | |
Pages | 408 |
Release | 2004 |
Genre | Banks and banking |
ISBN |
Should New Or Rapidly Growing Banks Have More Equity?
Title | Should New Or Rapidly Growing Banks Have More Equity? PDF eBook |
Author | Juha-Pekka Niinimäki |
Publisher | |
Pages | 36 |
Release | 2001 |
Genre | |
ISBN | 9789516867345 |
There is substantial evidence that new banks and rapidly growing banks are risk prone. We study this problem by designing a relationship-lending model in which a bank operates as a financial intermediary and centralised monitor. In the absence of deposit insurance, the bank's limited liability option creates an incentive problem between the bank and its depositors, the likely outcome of which is a reduction in the amounts of resources allocated to monitoring its borrowers. Hence, the bank must signal its safety to depositors by maintaining the equity ratio held. The optimal equity ratio is dynamic, ie new banks need relatively more equity than established banks, which enjoy profitable old lending relationships - charter value - that reduce the incentive problem. However, if an established bank grows rapidly, its share of old relationships also decreases and the bank will have to raise its equity ratio. With deposit insurance, regulators should set higher equity requirements for new banks and rapidly growing banks than for those in a more established position. The results of the model can be extended to more general inter-firm control of credit institutions.
BOFIT Discussion Papers
Title | BOFIT Discussion Papers PDF eBook |
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ISBN |
Working Papers (Bank of Finland Economics Department).
Title | Working Papers (Bank of Finland Economics Department). PDF eBook |
Author | Suomen Pankki. Economics Department |
Publisher | |
Pages | |
Release | 2000 |
Genre | |
ISBN |
Bank of Finland Economics Department Working Papers
Title | Bank of Finland Economics Department Working Papers PDF eBook |
Author | |
Publisher | |
Pages | |
Release | 1997* |
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ISBN |