Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5067525 | European Economic Review | 2006 | 8 Pages |
Abstract
This paper corrects a paper of David Miles, published in the European Economic Review in 1995, reversing some of the conclusions he draws. Solving his model correctly it turns out that, because depositors are unable to monitor the default risk of individual banks, moral hazard gives banks an incentive to increase risky lending. Prudential capital requirements reduce incentives to hold risky loans.
Keywords
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Alistair Milne,