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| Author: | Miles, D. |
| Title: | Optimal regulation of deposit taking financial intermediaries |
| Journal: | European Economic Review
1995 : AUG, VOL. 39:7, p. 1365-1384 |
| Index terms: | OPTIMIZATION REGULATIONS FINANCIAL INTERMEDIARIES |
| Language: | eng |
| Abstract: | This paper analyzes the case for special restrictions on commercial decisions of deposit taking financial intermediaries. The existence of asymmetric information between managers of intermediaries and depositors is shown to generate unregulated outcomes where equity capital is underutilized and lending is suboptimally low. A form of regulation to correct this market failure is designed. The form of regulation is a capital adequacy scheme of the same kind as those used by bank regulators. |
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