TY  - JOUR
AU  - Kane,Edward J.
TI  - Incentive Conflict in the International Regulatory Agreement on Risk-Based Analysis
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3308
PY  - 1991
Y2  - October 1991
UR  - http://www.nber.org/papers/w3308
L1  - http://www.nber.org/papers/w3308.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  - 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. 
ER  -