Allocating losses: Bail-ins, bailouts and bank regulation

• 成果类型: Article
• 署名作者: Keister, Todd; Mitkov, Yuliyan
• 署名单位: Rutgers University System; Rutgers University Camden; Rutgers University New Brunswick; University of Bonn
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2023.105672
• 发表日期: 2023
• 关键词: Bank bailouts; moral hazard; Financial stability; banking regulation

摘要

We study the interaction between the government's bailout policy and a bank's willingness to impose losses on (or bail in) investors based on its private information. In the absence of regulation, bail-ins in the early stages of a crisis are too small, while bailouts are too large and too frequent. Moreover, the bank may face a run by informed investors, creating further distortions and leading to a larger bailout. We show how a regulator with limited information can raise welfare and, in some cases, improve financial stability. The optimal policy involves partial delegation: the regulator sets bounds on the size of the bank's bail-in, but allows the bank to choose within these bounds.& COPY; 2023 Elsevier Inc. All rights reserved.