Market discipline and subordinated debt: A review of some salient issues

The concerns about the limitations and distortions attendant to the current regulatory environment are well placed. However, the limitations of market discipline are as important as the successes. While no regulatory or market mechanism can be perfect, all available alternatives should be considered...

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Bibliographic Details
Published in:Economic perspectives (1977) 2001-03, Vol.25 (1), p.24-24
Main Author: Bliss, Robert R
Format: Article
Language:English
Subjects:
Analysis
Banking industry
Bonds
Company business management
Debt
Deposit insurance
Economic aspects
Economic policy
Financial services
Management
Market orientation
Risk (Economics)
Studies
Yield
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Summary:The concerns about the limitations and distortions attendant to the current regulatory environment are well placed. However, the limitations of market discipline are as important as the successes. While no regulatory or market mechanism can be perfect, all available alternatives should be considered. Questions are raised about policy decisions and regulatory objectives. It is recommended that the central question of optimal bank insolvency prediction be addressed. The intuition underlying efforts to enhance market discipline of banking firms through subordinated debt issuance is examined from a number of perspectives.
ISSN:0164-0682
1048-115X
2163-3584