NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Incentive Conflict in the International Regulatory Agreement on Risk-Based Analysis

Edward J. Kane

NBER Working Paper No. 3308 (Also Reprint No. r1651)*
Issued in October 1991
NBER Program(s):   ME

Intergovernmental regulatory cooperation is fundamentally cartel

behavior and subject to principal-agent conflict. In negotiating the 1988

risk-based capital agreement, most Western officials' unstated goal may

arguably be described as postponing the pain of adapting their domestic

regulatory schemes to successor officials' watch. They hoped they could buy

time by raising book-value capital requirements for Japanese banks.

Efficient-market theory indicates that the market value rather than the

book value of a bank's capital impacts its funding cost. It also clarifies

that restrictions on domestic and foreign bank competition for Japanese

deposits unfairly enhance Japanese banks' ability to intermediate that

country's massive capital exports.

*Published: "Incentive Conflict in the International Regulatory Agreement on Risk-Based Capital." From Pacific-Basin Capital Markets Research, Volume II, editedby S.G. Rhee and R.P. Chang, pp. 3-21. Amsterdam: Elsevier Science Publishers B.V., 1991.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Information about Free Papers

You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, a site with your domain name in ".GOV", or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Machine-readable bibliographic record - MARC, RIS, BibTeX

 
Publications
Activities
Meetings
Data
People
About

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