NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Inadequacy of Nation-Based and VaR-Based Safety Nets in the European Union

Edward J. Kane

NBER Working Paper No. 12170
Issued in April 2006
NBER Program(s):   CF   ME

Considered as a social contract, a financial safety net imposes duties and confers rights on different sectors of the economy. Within a nation, elements of incompleteness inherent in this contract generate principal-agent conflicts that are mitigated by formal agreements, norms, laws, and the principle of democratic accountability. Across nations, additional gaps emerge that are hard to bridge. This paper shows that nationalistic biases and leeway in principles used to measure value-at-risk and bank capital make it unlikely that the crisis-prevention and crisis-resolution schemes incorporated in Basel II and EU Directives could allocate losses imbedded in troubled institutions efficiently or fairly across member nations.

download in pdf format
   (208 K)

email paper

This paper is available as PDF (208 K) or via email.

This paper was revised on July 14, 2006

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w12170

Published: Kane, Edward. "Inadequacy of nation-based and VaR-based safety nets in the European Union." The North American Journal of Economics and Finance 17, 3 (December 2006): 375-387. citation courtesy of

Users who downloaded this paper also downloaded these:
Pelizzon and Schaefer w11666 Pillar 1 vs. Pillar 2 Under Risk Management
Kane w12705 Basel II: A Contracting Perspective
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us