Incentive Conflict in the International Regulatory Agreement on Risk-Based Analysis / Edward J. Kane.

Format:

Book

Author/Creator:

Kane, Edward J.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w3308.

NBER working paper series no. w3308

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1990.

Summary:

Intergovernmental regulatory cooperation is fundamentally cartel behavior and subject to principal-agent conflict. In negotiating the 1988 risk-based capital agreement, most Western officials' unstated goal may arguably be described as postponing the pain of adapting their domestic regulatory schemes to successor officials' watch. They hoped they could buy time by raising book-value capital requirements for Japanese banks. Efficient-market theory indicates that the market value rather than the book value of a bank's capital impacts its funding cost. It also clarifies that restrictions on domestic and foreign bank competition for Japanese deposits unfairly enhance Japanese banks' ability to intermediate that country's massive capital exports.

Notes:

Print version record

March 1990.