TY  - JOUR
AU  - Kane,Edward J.
TI  - Inadequacy of Nation-Based and VaR-Based Safety Nets in the European Union
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12170
PY  - 2006
Y2  - April 2006
UR  - http://www.nber.org/papers/w12170
L1  - http://www.nber.org/papers/w12170.pdf
N1  - Author contact info:
Edward J. Kane
2325 E Calle Los Altos
Tucson, AZ 85718
Tel: 520-299-5066
E-Mail: edward.kane@bc.edu
AB  - 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.
ER  -