Do higher solvency ratios reduce the costs of bailing out insured banks?

Robert K. Eastwood
Additional contact information
Robert K. Eastwood: School of Social Sciences, University of Sussex, UK, Postal: School of Social Sciences, University of Sussex, UK

International Journal of Finance & Economics, 2004, vol. 9, issue 1, 39-48

Abstract: The relationship between solvency constraints and bank behaviour in the presence of fixed rate deposit insurance is investigated. A rise in the minimum solvency ratio does not necessarily reduce the adverse consequences of moral hazard: bank efficiency may fall and expected bailout costs may rise. Such outcomes are possible even if credit risk is purely systemic. Similar results obtain in respect of level increases in bank capital, tangible or intangible, although in this case purely systemic risk excludes perverse outcomes. Copyright © 2003 John Wiley & Sons, Ltd.

Date: 2004
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1002/ijfe.220 Link to full text; subscription required (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ijf:ijfiec:v:9:y:2004:i:1:p:39-48

Ordering information: This journal article can be ordered from
http://jws-edcv.wile ... PRINT_ISSN=1076-9307

DOI: 10.1002/ijfe.220

Access Statistics for this article

International Journal of Finance & Economics is currently edited by Mark P. Taylor, Keith Cuthbertson and Michael P. Dooley

More articles in International Journal of Finance & Economics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing () and Christopher F. Baum ().