Distinguishing Features of Banks for the Relational Approach

Francesco de Zwart
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Francesco de Zwart: University of Adelaide

Chapter Chapter 7 in The Key Code and Advanced Handbook for the Governance and Supervision of Banks in Australia, 2022, pp 83-93 from Springer

Abstract: Abstract Chapter 7 of the Stage 2 Key Code and Advanced Handbook examines the distinguishing feature of banks in the relational approach. We open by examining the similarities and differences with the Enron collapse examined in detail in Stage 1. Then the distinguishing features of banks are examined in detail – the maturity of debt, liquidity, leverage and the interconnectedness of banks. There follows a review of deposit insurance, government bailout and risk-taking including Hopt’s risk-taking and free-riding and the recognition that depositors are stakeholders in banks. Systemic risk is then examined including the EC’s ‘domino effect’ and differing risk preferences for shareholders and depositors. Conflicts of Interest are identified and the perceived weaknesses in governance codes. The chapter concludes with the recognition that specific governance variables for the distinguishing features of banks and specialised bank regulation are needed to introduce the [BankPrudReg] (+) variable for banks – the regulatory, prudential and supervisory regime. Also proposed are bank-specific governance variables for deposit insurance, bailout and the effects of risk-taking, maturity transformation, liquidity and risk management.

Keywords: Distinguishing features of banks; Maturity of debt; Liquidity; Leverage; Interconnectedness of banks; Deposit insurance; Government bailout; Risk-taking; Systemic risk; Governance variables for distinguishing features (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-981-16-1710-2_7

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DOI: 10.1007/978-981-16-1710-2_7

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