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Bank capital forbearance and serial gambling

Gespeichert in:

Personen und Körperschaften: Martynova, Natalya (VerfasserIn), Perotti, Enrico C. (VerfasserIn), Suárez, Javier (VerfasserIn)
Weitere Verfasser: Perotti, Enrico C. [VerfasserIn] • Suárez, Javier [VerfasserIn]
Format: E-Book
Sprache: Englisch
veröffentlicht:
Frankfurt am Main Deutsche Bundesbank [2020]
Gesamtaufnahme: Deutsche Bundesbank: Discussion paper ; no 2020, 56
Quelle: Verbunddaten SWB
Lizenzfreie Online-Ressourcen
ISBN: 9783957297822
3957297826
Details
Zusammenfassung: We analyze the strategic interaction between undercapitalized banks and a supervisor who may intervene by preventive recapitalization. Supervisory forbearance emerges because political and fiscal costs undermine supervisors' commitment to intervene. When supervisors have lower credibility, banks' incentives to voluntary recapitalize are lower and supervisors may end up intervening more. Importantly, when intervention capacity is constrained (e.g. for fiscal reasons), private recapitalization decisions become strategic complements, producing equilibria with extremely high forbearance and high systemic costs. Anticipating forbearance in response to diffuse undercapitalization, banks may ex ante choose more correlated risks, a form of "serial gambling" undermining the supervisory response.
Umfang: 1 Online-Ressource (circa 57 Seiten); Illustrationen
ISBN: 9783957297822
3957297826