Gambling on a bail-out : regulation, moral hazard and time inconsistencies in the international banking system

The purpose of this thesis is to analyze the international banking system from a broad perspective. The intent is to study the legal and regulatory framework in modern banking in order to gain insights into key debates that are currently taking place amongst policy planners on an optimum banking structure. The subprime crisis of 2008 is used as an entry point into these debates as many of the initiatives to improve the architecture of international finance are directly induced by the disastrous effects of the crisis. Banking systems are vulnerable to failures due to the maturity mediation process which banking institutions perform. Financial regulation is aimed at protecting banking systems and ensure financial stability. Various differences exist in the implementation and scope of financial regulation across financial markets and borders. These discrepancies challenge the principle of a single market in financial services in Europe. In the US, banks and financial institutions co-exist inside and outside of the Federal Reserve System. International financial markets are therefore fragmented from a regulatory perspective. The problem of institutions considered too-big-to-fail relates to systemically important firms that cannot fail without discharging a shock throughout the financial system. In recent years, banks and financial institutions have achieved growth which is disproportional to growth in other sectors of the economy. The importance of a well run banking system has increased in proportion to this growth. At the same time, policy planners have not been able to formulate responses that facilitate financial stability without increasing moral hazard. Therefore, the growth of the banking sector has represented a shift in power from the government and to private financial companies. Current regulatory reforms are largely aimed at rebalancing control in the financial system and reduce moral hazard.

Author dc:creator

• Þórður Þ. Gunnþórsson 1982-

Contributors dc:contributor

• Háskólinn á Bifröst

• Viðskiptafræði
• Fjármálafyrirtæki
• Eftirlitsstofnanir
• Alþjóðafjármál

Language dc:language.iso

en

Handle dc:identifier.uri

http://hdl.handle.net/1946/9833

OAI identifier oai:identifier

oai:skemman.is:1946/9833