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On dividend restrictions and the collapse of the interbank market

By Charles Goodhart, M. U. Peiris, D. P. Tsomocos and A. P. Vardoulakis

Abstract

Until recently, financial services regulation remained largely segmented along national lines. The integration of financial markets, however, calls for a systematic and coherent approach to regulation. This paper studies the effect of market based regulation on the proper functioning of the interbank market. Specifically, we argue that restrictions on the payout of dividends by banks can reduce their expected default on (interbank) loans, stimulate trade in this market and improve the welfare of consumers

Topics: HG Finance
Publisher: Springer
Year: 2010
DOI identifier: 10.1007/s10436-010-0147-5
OAI identifier: oai:eprints.lse.ac.uk:35072
Provided by: LSE Research Online
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