Encyclopedia of Law and Economics

2019 Edition
| Editors: Alain Marciano, Giovanni Battista Ramello

Banks

  • Danny Cassimon
  • Mark A. Dijkstra
  • Peter-Jan EngelenEmail author
Reference work entry
DOI: https://doi.org/10.1007/978-1-4614-7753-2_95

Definition

Banks are financial intermediaries between economic agents with surplus funds and those with a shortage of funds and convert short-term deposits into long-term loans.

Introduction

Banks are institutions that intermediate between agents (households, firms, the government) with surplus funds and those with a shortage of funds. As such, they manage to provide for safe and liquid savings opportunities as well as long-term credit facilities, without the need for those two parties to interact and negotiate a financial contract directly. In this way, they decrease search and other transaction costs, solve potential mismatches between demand and supply in terms of maturity and degree of liquidity, and aim at solving risk and asymmetric information problems. Ultimately, the purpose of financial intermediation by banks is to make finance available for investment, leading to economic growth and financial inclusion, i.e., access to financial services for all.

In the following, we first...

This is a preview of subscription content, log in to check access.

References

  1. Admati AR, DeMarzo P, Hellwig M, Pfleiderer P (2013) Fallacies, irrelevant facts, and myths in capital regulation: why bank equity is not socially expensive. Stanford University Working Paper Series no. 161Google Scholar
  2. Beck T (2008) Bank competition and financial stability: friends or foes? World Bank Policy Research Working Paper no. 4656Google Scholar
  3. Benmelech E, Moskowitz TJ (2010) The political economy of financial regulation: evidence from U.S. state usury laws in the 19th century. J Financ 65(3):1029–1073CrossRefGoogle Scholar
  4. Bhattacharya S, Thakor AV (1993) Contemporary banking theory. J Financ Intermed 3(1):2–50CrossRefGoogle Scholar
  5. Bhattacharya S, Boot AWA, Thakor AV (1998) The economics of bank regulation. J Money Credit Bank 30(4):745–770CrossRefGoogle Scholar
  6. Boot AWA (2017) The future of banking: from scale & scope economies to fintech. Eur Econ 2(2):77–95Google Scholar
  7. Boot AWA, Thakor AV (2002) Can relationship banking survive competition? J Financ 55(2):679–713CrossRefGoogle Scholar
  8. Brunnermeier M (2009) Deciphering the liquidity and credit crunch 2007–2008. J Econ Perspect 23(1):77–100CrossRefGoogle Scholar
  9. Claessens S, Pozsar Z, Ratnovsky L, Singh M (2012) Shadow banking: economics and policy. IMF Staff Discussion Note 12/12Google Scholar
  10. Diamond D, Dybvig P (1983) Bank runs, deposit insurance, and liquidity. J Polit Econ 91(3):401–419CrossRefGoogle Scholar
  11. Elliot DJ, Rauch C (2014) Lessons from the Implementation of the Volcker rule for banking structural reform in the European Union, Goethe University White Paper Series no. 13Google Scholar
  12. European Commission (2014) Proposal for the regulation of the European Parliament and of the Council on structural measures improving the resilience of EU credit institutions. Proposal 52014PC0043Google Scholar
  13. European Commission (2015) Towards a European Deposit Insurance Scheme. Five Presidents’ Report Series Issue 01/2015Google Scholar
  14. Gorton G, Pennacchi G (1990) Financial intermediaries and liquidity creation. J Financ 45(1):49–71CrossRefGoogle Scholar
  15. Hasan I, Marinc M (2016) Should competition policy in banking be amended during crises? Lessons from the EU. Eur J Law Econ 42(2):295–324CrossRefGoogle Scholar
  16. Holmström B, Tirole J (1997) Financial intermediation, loanable funds, and the real sector. Q J Econ 106(1):1–39Google Scholar
  17. Hull JC (2018) Risk management and financial institutions, 5th edn. Wiley, HobokenGoogle Scholar
  18. Laeven L, Valencia F (2018) Systemic Banking Crises Revisited. IMF Working Paper No. 18/206CrossRefGoogle Scholar
  19. Mishkin FS, Eakins SG (2015) Financial markets and institutions, 8th edn. Pearson, BostonGoogle Scholar
  20. Posner EA (1995) Contract law in the welfare state: a defense of the unconscionability doctrine, usury laws, and related limitations on the freedom to contract. J Leg Stud 24(2):283–319CrossRefGoogle Scholar
  21. Van Essen M, Engelen PJ, Carney M (2013) Does ‘good’ corporate governance help in a crisis? The impact of country- and firm-level governance mechanisms in the European financial crisis. Corp Gov 21:201–224CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  • Danny Cassimon
    • 1
  • Mark A. Dijkstra
    • 2
  • Peter-Jan Engelen
    • 2
    • 3
    Email author
  1. 1.Institute of Development Policy and Management (IOB)University of AntwerpAntwerpBelgium
  2. 2.Utrecht School of Economics (USE)Utrecht UniversityUtrechtThe Netherlands
  3. 3.Faculty of Business and EconomicsUniversity of AntwerpAntwerpenBelgium