Premium
Bank Deregulation, Supervision, and Agency Problems
Author(s) -
Davis Kevin
Publication year - 1995
Publication title -
australian economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.308
H-Index - 29
eISSN - 1467-8462
pISSN - 0004-9018
DOI - 10.1111/j.1467-8462.1995.tb00992.x
Subject(s) - deregulation , corporate governance , business , agency (philosophy) , capital market , government (linguistics) , competition (biology) , financial system , accounting , agency cost , finance , control (management) , financial market , economics , market economy , management , ecology , philosophy , linguistics , biology , shareholder , epistemology
This article argues that the financial instability of the 1980s following financial deregulation in Australia can be partly traced to a lack of attention to agency problems in banking. Because the market for corporate control and corporate governance structures in banking were unsatisfactory, the benefits of increased competition in financial product markets were offset by inadequate monitoring and controls on bank management. It is also argued that the current emphasis of prudential supervision on capital adequacy requirements can provide only a partial solution to achieving efficiency and stability in the financial sector—because it focuses only upon the agency relationships between owners and government/depositors. Complementary developments in corporate governance and control are required to address agency relationships involving bank management. Some recent developments in this area and in supervision of non‐bank financial markets are assessed from the perspective developed in this article.