A Model of Competition in Banking: Bank Capital vs. Expertise

  title={A Model of Competition in Banking: Bank Capital vs. Expertise},
  author={A. Almaz{\'a}n},
  journal={Journal of Financial Intermediation},
  • A. Almazán
  • Published 2002
  • Economics
  • Journal of Financial Intermediation
  • This paper presents a model of competition in the banking industry based upon the interplay of two factors: the level of capitalization of banks and their ability to monitor different types of projects (i.e., their expertise). In a setting of moral hazard with limited liability, banks must receive some rents to induce them to monitor projects diligently. The rents are decreasing in the banks' expertise and in the amount of capital that banks are able to commit to a project. This leads to a… CONTINUE READING
    89 Citations

    Figures and Tables from this paper

    Multiple Bank-Lending: Diversification and Free-Riding in Monitoring
    • 4
    • Highly Influenced
    • PDF
    Moral Hazard and Banking Competition
    • Highly Influenced
    Multiple-bank lending: diversification and free-riding in monitoring
    • 153
    • Highly Influenced
    • PDF
    Financial Market Integration and Loan Competition: When is Entry Deregulation Socially Beneficial?
    • 47
    • Highly Influenced
    • PDF


    Bank Capitalization and Cost: Evidence of Scale Economies in Risk Management and Signaling
    • 409
    • PDF
    Can Relationship Banking Survive Competition
    • 1,306
    • PDF
    A Theory of Bank Capital
    • 1,309
    • PDF
    U.S. Commercial Banking: Trends, Cycles, and Policy
    • 151
    • Highly Influential
    • PDF
    Capital Requirements, Monetary Policy, and Aggregate Bank Lending: Theory and Empirical Evidence
    • 561
    Monitoring and Reputation: The Choice between Bank Loans and Directly Placed Debt
    • D. Diamond
    • Economics
    • Journal of Political Economy
    • 1991
    • 2,793
    • PDF
    Delegated Monitoring and Bank Structure in a Finite Economy
    • 106
    The Regulation of Bank Capital: Do Capital Standards Promote Bank Safety?
    • 330
    Financial Intermediation, Loanable Funds, and The Real Sector
    • 3,439
    • Highly Influential
    • PDF
    The Prudential Regulation of Banks
    • 778