Working Paper No. 13-28 Banking Crises and the Role of Bank Coalitions
نویسندگان
چکیده
The goal of this paper is to provide a framework to analyze the e¤ectiveness of bank coalition formation in response to an external aggregate shock that may cause disruption to the payment mechanism and real economic activity. I show that the kind of insurance mechanism provided by a speci c type of bank coalition allows society to completely prevent any disruption to real activity that can be caused by a temporary drop in the value of banking assets, at least in the case of a shock that is not too big. If the shock is relatively large, then a private bank coalition will be unable to completely prevent a disruption in real activity even though it will be able to substantially mitigate the e¤ects on equilibrium quantities and prices. Thus, the existence of a private bank coalition of the kind described in this paper can be an e¤ective means of preventing signi cant disruptions in trading activity. Keywords: banking crisis, bank coalition, interbank credit, payment system JEL classi cations: E42, G01, G21
منابع مشابه
Working Paper No. 13-28/r Banking Crises and the Role of Bank Coalitions
I study the e¤ectiveness of bank coalition formation in response to an external aggregate shock that may cause disruption to the payment mechanism and trading activity. I show that a speci c type of bank coalition (a joint-liability arrangement) is an e¤ective arrangement that allows member banks to build a capital bu¤er that permits them to absorb the e¤ects of an external shock. In particular...
متن کاملCentral Bank Monetary Policy And Its Role In The Emergence Of Banking Crises In The Iranian Economy Within Modified Money Market Pressure Index
In recent years, the banking crisis has increased the attention of researchers toward the banking system reform and solutions to it. The banking crisis can be accompanied by a banking run, banking panic, a rise in the Non-performing loan in banking system, fluctuations in cash and non-cash assets, and so on. On the other hand, the central bank's monetary policy has also played an important rol...
متن کاملCredit constraints, financial liberalisation and twin crises - Working Paper No. 124 - January 2003
This paper proposes a continuous-time framework that explains some stylised facts in recent “twin crises” episodes. I show that access to the world capital market enables the domestic economy to achieve a more efficient allocation of resources. However, the banking sector becomes more fragile when this international borrowing is wealth-constrained. A temporary shock is amplified and becomes per...
متن کاملMoney Market Pressure and the Determinants of Banking Crises
Identifying banking crises is the first step in the research on determinants of banking crises. The prevailing practice is to employ market events to identify a banking crisis. Researchers justify the usage of this method on the grounds that either direct and reliable indicators of banks’ assets quality are not available, or that withdrawals of bank deposits are no longer a part of financial cr...
متن کاملLiquidity Coverage Ratio, Ownership, Stability: Evidence from Iran
The Basel Committee on Banking Supervision (BCBS), in response to the recent financial crisis, has developed new stability rules aimed at preventing financial crises in the future. This paper uses the new Liquidity Ratio (LCR) and attempts to determine the impact of this ratio on the stability of the banking system. The objective of the LCR is to promote the short-term resilience of the liquidi...
متن کامل