IDEAS home Printed from https://ideas.repec.org/a/eee/jetheo/v219y2024ics0022053124000656.html
   My bibliography  Save this article

Deposit insurance, bank regulation, and narrow banking

Author

Listed:
  • Williamson, Stephen

Abstract

Narrow banking has surfaced frequently as a proposed framework for dealing with financial instability and inefficiency. Recent proposals include reforms intended to improve the implementation of monetary policy, and to deal with perceived problems related to stablecoins. A model is constructed in which banks must deal with three frictions: limited commitment, moral hazard with respect to risky assets, and potential misrepresentation of safe assets. Surprisingly, deposit insurance does not engender inefficiency, and government-imposed capital requirements and leverage requirements serve to reduce welfare. The viability of narrow banking depends on inefficient regulation in conventional banking, and narrow banking is never welfare-improving.

Suggested Citation

  • Williamson, Stephen, 2024. "Deposit insurance, bank regulation, and narrow banking," Journal of Economic Theory, Elsevier, vol. 219(C).
    • Handle: RePEc:eee:jetheo:v:219:y:2024:i:c:s0022053124000656
    DOI: 10.1016/j.jet.2024.105859
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0022053124000656
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jet.2024.105859?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Bank regulation; Deposit insurance; Narrow banking;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jetheo:v:219:y:2024:i:c:s0022053124000656. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/622869 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.