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Farhi, Emmanuel
and Tirole, Jean
(2021)
Shadow banking and the four pillars of traditional financial intermediation.
The Review Of Economic Studies, vol. 88 (n° 6).
pp. 2622-2653.
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Abstract
Traditional banking is built on four pillars: SME lending, insured deposit taking, access to lender of last resort, and prudential supervision. This paper unveils the logic of the quadrilogy by showing that it emerges naturally as an equilibrium outcome in a game between banks and the government. A key insight is that regulation and public insurance services (LOLR, deposit insurance) are complementary. The model also shows how prudential regulation must adjust to the emergence of shadow banking, and rationalizes structural remedies to counter bogus liquidity hoarding and financial contagion: ring-fencing between regulated and shadow banking and the sharing of liquidity in centralized platforms.
| Item Type: | Article |
|---|---|
| Language: | English |
| Date: | November 2021 |
| Refereed: | Yes |
| Place of Publication: | London. |
| Uncontrolled Keywords: | Retail and shadow banks, lender of last resort, deposit insurance, supervision, migration, ring-fencing, CCPs, narrow banks |
| JEL Classification: | E44 - Financial Markets and the Macroeconomy E58 - Central Banks and Their Policies G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages G28 - Government Policy and Regulation |
| Subjects: | B- ECONOMIE ET FINANCE |
| Divisions: | TSE-R (Toulouse) |
| Site: | UT1 |
| Date Deposited: | 27 Jan 2022 13:56 |
| Last Modified: | 27 Jan 2022 13:56 |
| OAI Identifier: | oai:tse-fr.eu:125175 |
| URI: | https://publications.ut-capitole.fr/id/eprint/42296 |
