- مبلغ: ۸۶,۰۰۰ تومان
- مبلغ: ۹۱,۰۰۰ تومان
This paper aims to explore the role of the universal banking system in contributing to the stock market bust in the wake of the financial crisis 2008–2009 when bankers might have incentive to hide information from shareholders. We set up a stylized model of consumption smoothing involving universal banks that undertake both investment and commercial banking activities. Banks have private information about the outcome of a project that it funds. In the wake of bad news about the project, the banker has an incentive to sell lemon shares in a secondary market with the pretence of a liquidity crunch. Our model shows that such an incentive results in (i) a sharp discounting of stock prices, (ii) greater loan demand (iii) higher fraction of bank ownership of the borrowing firms, and (iv) heightened consumption risk resulting in precautionary savings by households. The magnitude of these effects depends on the market's perception about the preponderance of lemons in the stock market. A credible punishment scheme implemented by the government in the form of fines may moderate the stock market decline and consumption volatility due to information friction. However, it imposes a deadweight loss on private citizens because of a fall in all banks' expected profit. On the other hand, a “ring-fenced” banking arrangement along the way suggested by the Vickers Commission may entail a first order welfare loss due to the lack of diversification opportunities.
The universal banking system has been a subject of controversy especially in the wake of current financial crisis. The critics argue that such a system could inflict excessive risks on the financial system. In this paper, we evaluate the nature of such risks and the consequent impact on overall banking activities. We find that discounting of stocks, volatilities in consumption, pushing of loans and excessive savings could emerge if hidden information is pervasive and if particularly the probability of bad aggregate shock is high. The major policy question still remains open whether Glass– Steagall banking should be brought back and ring fencing should be strengthened. The recommendation of the independent banking commission in the UK and the recent trends in the US banking system point to this direction. While a full blown comparison of universal banking and a stand-alone banking systems is beyond the scope of this paper, one can argue on the basis of our model that a universal banking system could efficiently allocate risk and could replicate the first best optimum under an ideal scenario of no information friction. In the presence of information friction, the undesirable consequences have to be weighed against the inefficiency imposed by the artificial separation between commercial and investment banking in a Glass–Steagall banking regime. The universal banking could work well if the regulatory authorities are committed to enforce strict disclosure of regimes to eliminate the information frictions. This together with a small punitive tax on trading of stocks can reduce the lemon problem of the universal banking and can improve the efficiency of the banking sector although it could still entail some welfare loss due to a blanket tax in all banks' profits.