Abstract

http://ssrn.com/abstract=310542
 
 

References (11)



 
 

Citations (8)



 


 



Allocating Lending of Last Resort and Supervision in the Euro Area


Charles M. Kahn


University of Illinois, Urbana-Champaign

João A. C. Santos


Federal Reserve Bank of New York

2002


Abstract:     
The Maastricht Treaty created the European System of Central Banks and the European Central Bank to head this system. The Treaty entrusted the European Central Bank with the responsibility for monetary policy, but it did not give this institution supervisory powers or an explicit mandate for providing emergency liquidity support to individual banks. National authorities remained responsible for financial stability. As a result, in the euro area some bank regulatory functions are centralized, while others are allocated to not one, but multiple, competing national regulators. Previous researchers have discussed the potential implications of this institutional allocation of regulation on the financial stability of the region. In this chapter, we investigate instead the potential efficiency implications. We focus on the consequences of the allocation of the lender of last resort and supervisory functions for the degree of forbearance in closing distressed banks and for the level of diligence in bank supervision. We conclude that the integration of banking markets without the integration of regulatory functions increases forbearance and decreases supervision. Centralizing regulatory functions will tend to reverse this decline. If only one of the two functions is centralized, then it will be more effective to centralize the supervisory function.

Number of Pages in PDF File: 25

working papers series


Download This Paper

Date posted: May 24, 2002  

Suggested Citation

Kahn, Charles M. and Santos, João A. C., Allocating Lending of Last Resort and Supervision in the Euro Area (2002). Available at SSRN: http://ssrn.com/abstract=310542 or http://dx.doi.org/10.2139/ssrn.310542

Contact Information

Charles M. Kahn
University of Illinois, Urbana-Champaign ( email )
Department of Finance
340 Wohlers Hall
Champaign, IL 61820
United States
217-333-2813 (Phone)
HOME PAGE: http://kahnfrance.com/cmk/
João A. C. Santos (Contact Author)
Federal Reserve Bank of New York ( email )
33 Liberty Street
New York, NY 10045
United States
212-720-5583 (Phone)
212-720-8363 (Fax)
HOME PAGE: HTTP://WWW.NEWYORKFED.ORG/RMAGHOME/ECONOMIST/SANTOS/CONTACT.HTML
Feedback to SSRN


Paper statistics
Abstract Views: 2,432
Downloads: 350
Download Rank: 45,456
References:  11
Citations:  8

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo6 in 0.406 seconds