This text applies modern economic theory to prudential regulation of financial intermediaries. The authors tackle the key problem of providing the right incentives to management in banks by looking at how external intervention by claimholders affects managerial incentives and how that intervention might ideally be implemented. The primary focus is the regulation of commercial banks and S&Ls, but many of the implications of their theory are also valid for other intermediaries such as insurance companies, pension funds and securities funds.
This text applies modern economic theory to prudential regulation of financial intermediaries. The authors tackle the key problem of providing the right incentives to management in banks by looking at how external intervention by claimholders affects managerial incentives and how that intervention might ideally be implemented. The primary focus is the regulation of commercial banks and S&Ls, but many of the implications of their theory are also valid for other intermediaries such as insurance companies, pension funds and securities funds.