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Federal Reserve Bank of Chicago
Bank Capital Regulation With and Without
State-Contingent Penalties
By: David A. Marshall and Edward S.
Prescott
WP 2000-10
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73
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:404881
74
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45331
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ss1 40671
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75
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qlvpv dqg Idluo| Sulfhg Ghsrvlw Lqvxudqfh/ Mrxuqdo ri Edqnlqj dqg
Ilqdqfh 55/ 4<<;/ ss1 446<044891
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phufldo Edqnv/ Hxurshdq Hfrqrplf Uhylhz 69/ 4<<5/ ss1 446:044:;1
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Edqnlqj Ulvnv/ Hxurshdq Hfrqrplf Uhylhz 76/ 4<<</ ss1 <;40<<31
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5341
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76
Panel A
Panel D
0.8
Default Prob.
Deposits
1
0.8
0.6
0.4
0.2
0.2
0.4
0.6
Panel B
0.8
0.35
0.25
0.2
0
0.2
0.4
0.6
Panel C
0.8
0.2
0.4
0.6
Panel E
0.8
1
1.4
unreg. bank
full info. reg.
cap. reg.
1.3
0
0.2
0.4
0.6
Panel F
0.8
1
0
0.2
0.4
0.8
1
Value Function
2.5
1.5
sigma
0
1.5
1.2
1
2
1
0.5
0
0.2
1.6
0.3
0.15
0.4
0
1
Portfolio Mean
Screening Expenditure
0
0.6
0
0.2
0.4
0.6
0.8
1
2
1.5
1
psi
0.6
psi
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4@
4?
4@
4?
77
Panel A
Panel D
0.8
Default Prob.
Deposits
1
0.5
0
0.2
0.4
0.6
Panel B
0.8
0.25
0.15
0.1
0
0.2
0.4
0.6
Panel C
0.8
0.2
0.4
0.6
Panel E
0.8
1
1.4
unreg. bank
full info. reg.
cap. reg.
1.3
0
0.2
0.4
0.6
Panel F
0.8
1
0
0.2
0.4
0.8
1
Value Function
2.5
1.5
sigma
0
1.5
1.2
1
2
1
0.5
0
0.2
1.6
0.2
0.05
0.4
0
1
Portfolio Mean
Screening Expenditure
0
0.6
0
0.2
0.4
0.6
0.8
1
2
1.5
1
psi
0.6
psi
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78
Baseline
0.8
Default Prob.
Deposits
1
Full information
Unregulated market
Capital reg only
Capital and fines
0.5
0
0
0.1
0.2
0.3
0.4
0.6
0.4
0.2
0
0.5
0
0.1
0.2
0.25
0.2
0.5
0
0.1
0.2
0.3
0.4
0.3
0.4
0.5
0.3
0.4
0.5
1.5
1.45
1.4
0.5
0
0.1
0.2
psi
2.5
Value Function
1.5
Sigma
0.4
1.55
psi
1
0.5
0
0.3
psi
1.6
Portfolio Mean
Screening Expenditure
psi
0.3
0
0.1
0.2
0.3
0.4
2
1.5
1
0.5
psi
0
0.1
0.2
psi
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vwduv,1
79
Baseline, franchise value = 0.0
1.8
Limited liability constraint
1.6
1.4
1.2
Fine
1
0.8
0.6
0.4
0.2
0
0.5
1
1.5
2
2.5
3
Return
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olqh uxq zlwk ' ff1
7:
Baseline, franchise value = 0.15
1.8
Limited liability constraint
1.6
1.4
1.2
Fine
1
0.8
0.6
0.4
0.2
0
0.5
1
1.5
2
2.5
3
Return
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olqh uxq zlwk ' fD1
7;
Baseline
0.8
Default Prob.
Deposits
1
0.8
0.6
Capital reg only
Capital and fines
Capital and monotonicity
0.6
0.4
0.2
0
0
0.1
0.2
0.3
0.4
0.5
0
0.1
0.2
0.25
0.2
0.5
0
0.1
0.2
0.3
0.4
0.3
0.4
0.5
0.3
0.4
0.5
1.5
1.45
1.4
0.5
0
0.1
0.2
psi
2.5
Value Function
1.5
Sigma
0.4
1.55
psi
1
0.5
0
0.3
psi
1.6
Portfolio Mean
Screening Expenditure
psi
0.3
0
0.1
0.2
0.3
0.4
2
1.5
1
0.5
psi
0
0.1
0.2
psi
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uhjxodwlrq +grwwhg olqhv,/ rswlpdo fdslwdo uhjxodwlrq zlwk qhv +-,/ dqg
rswlpdo fdslwdo uhjxodwlrq zlwk qhv xqghu wkh frqvwudlqw wkdw qhw lqfrph
eh prqrwrqlfdoo| lqfuhdvlqj lq sruwirolr uhwxuq +vrolg olqhv,1
7<
Baseline, monotonicity case, franchise value = 0.05
2
Limited liability constraint
Fine
1.5
1
0.5
0
0.5
1
1.5
2
2.5
3
2
2.5
3
Return
1
Net return
0.8
0.6
0.4
0.2
0
0.5
1
1.5
Return
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prqrwrqlflw| frqvwudlqw1 Uhvxowv iru edvholqh sduhphwhul}dlwrq zlwk '
ffD
83
@FedFRASER