Show Summary Details

Page of

PRINTED FROM OXFORD HANDBOOKS ONLINE (www.oxfordhandbooks.com). (c) Oxford University Press, 2015. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy).

date: 19 February 2018

Abstract and Keywords

This article describes research that suggests that bank securities' prices (including stock, bonds, and CDSs) can be used to improve government supervisory processes. The second section defines the concept of market discipline and explains the importance of its two main components: market monitoring of firm value and market influence over a firm's behaviour. The third section explains how the view of banking firms as unusually ‘opaque’ may create a need for government regulation, and discusses whether banks are truly opaque. The evidence on investors' ability to monitor bank condition accurately is described in the fourth section, which concludes that bond yields do reflect bank risks, and that depositors withdraw funds when a bank's riskiness increases. The fifth section discusses some of the practical issues related to the use of market information and proposes the best way to incorporate market assessments into the supervisory process. The sixth section evaluates the concept of market discipline in light of the financial crisis that began in August 2007.

Keywords: bank securities prices, market discipline, financial regulation, bank condition, bond yields, bank risks

Access to the complete content on Oxford Handbooks Online requires a subscription or purchase. Public users are able to search the site and view the abstracts and keywords for each book and chapter without a subscription.

Please subscribe or login to access full text content.

If you have purchased a print title that contains an access token, please see the token for information about how to register your code.

For questions on access or troubleshooting, please check our FAQs, and if you can''t find the answer there, please contact us.