Stephanou, Constantinos2012-03-192012-03-192010-03-01https://hdl.handle.net/10986/3717The main objective of this paper is to rethink the use of market discipline for prudential purposes in light of lessons from the financial crisis. The paper develops the main building blocks of a market discipline framework, and argues for the need to take an expansive view of the concept. It also illustrates using actual bank case studies from the United States its apparent failures in the crisis, particularly the failure to prevent the buildup of systemic, as opposed to idiosyncratic, risks. However, while the role of market discipline in the design of macro-prudential regulation appears to be largely constrained, more can be done on the micro-prudential side to promote clearer market signals of bank riskiness and to encourage their use in the supervisory process.CC BY 3.0 IGOACCOUNTINGACCOUNTING RULESACCOUNTING STANDARDSAGENCY PROBLEMSAMOUNT OF DEBTAMOUNT OF RISKASYMMETRIC INFORMATIONAUDITORSBALANCE SHEETBANK BEHAVIORBANK EXPOSURESBANK FAILUREBANK FOR INTERNATIONAL SETTLEMENTSBANK HOLDINGBANK HOLDING COMPANIESBANK LENDINGBANK MANAGEMENTBANK POLICYBANK PROFITSBANK REGULATIONBANK SECURITIESBANK SECURITYBANK SUPERVISORSBANKING CRISISBANKING REGULATIONBANKING SECTORBANKING SUPERVISIONBANKING SYSTEMBANKRUPTCYBANKSBASIS POINTSBOARDS OF DIRECTORSBOND YIELDBONDSCAPITAL ACCORDCAPITAL MARKETSCAPITAL REQUIREMENTSCAPITAL STANDARDSCAPITAL STRUCTURECDSCHECKSCLASS ACTIONCOMMERCIAL BANKSCOMMON SHARESCOMMON STOCKCONFLICTS OF INTERESTCONSOLIDATIONCONTINGENCY PLANSCONTRACT ENFORCEMENTCONVERTIBLE DEBENTURESCORPORATE FINANCECORPORATE GOVERNANCECOUPONCOUPON RATECREDIT DEFAULTCREDIT DEFAULT SWAPSCREDIT RATINGCREDIT RATING AGENCIESCREDIT RATINGSCREDIT RISKCREDITORSDEBT INSTRUMENTDEBT ISSUANCEDEBT PRICEDEBT PRICESDEPOSITDEPOSIT INSURANCEDEPOSIT INSURANCE COVERAGEDEPOSIT INSURANCE SCHEMESDEPOSITORDEPOSITORSDEPOSITSDERIVATIVESDEVELOPING COUNTRIESDEVELOPMENT BANKDISCLOSURE REQUIREMENTSDIVIDENDEFFICIENT MARKETEFFICIENT MARKETSEMERGING ECONOMIESEQUITIESEQUITY HOLDINGSEQUITY INDEXEQUITY MARKETEQUITY PRICESEXPOSUREEXTERNAL MARKETEXTERNALITIESFACE VALUEFAIRFAIR VALUEFEDERAL RESERVEFEDERAL RESERVE SYSTEMFINANCIAL ACCOUNTINGFINANCIAL CRISISFINANCIAL DEREGULATIONFINANCIAL INSTITUTIONSFINANCIAL INSTRUMENTSFINANCIAL MARKETFINANCIAL MARKETSFINANCIAL PERFORMANCEFINANCIAL REGULATIONFINANCIAL SECTORFINANCIAL SERVICESFINANCIAL STABILITYFINANCIAL STRENGTHFINANCIAL SYSTEMFINANCIAL SYSTEMSGAMBLINGGLOBAL BANKINGGLOBALIZATIONGOOD GOVERNANCEGOVERNANCE PRACTICESGOVERNMENT INTERVENTIONGOVERNMENT SUPPORTHEDGE FUNDSHOSTILE TAKEOVERSHYBRID SECURITIESILLIQUIDITYINDIVIDUAL MARKETINFORMATION ASYMMETRIESINFORMATION DISCLOSUREINFORMATION DISCLOSURESINFORMATIONAL ASYMMETRIESINSTITUTIONAL ENVIRONMENTSINSTITUTIONAL INVESTORSINSTRUMENTINSURANCEINSURANCE COMPANIESINTERNATIONAL ACCOUNTING STANDARDSINTERNATIONAL BANKINTERNATIONAL ECONOMICSINVESTMENT BANKINVESTMENT BANKSINVESTOR PROTECTIONJUNK BONDLACK OF TRANSPARENCYLEGAL PROTECTIONLENDERLEVEL OF RISKLEVYLIABILITYLIMITED LIABILITYLIQUID MARKETSLOANMACROECONOMIC ENVIRONMENTMACROECONOMIC POLICIESMANDATESMARKET BENCHMARKMARKET BENCHMARKSMARKET DISCIPLINEMARKET INFORMATIONMARKET PARTICIPANTSMARKET PLAYERSMARKET PRICESMARKET PRICINGMARKET REGULATIONMARKET RISKMARKET THEORYMATURITYMORAL HAZARDMORTGAGENARROW BANKINGPOLICY RESPONSESPOLITICAL CONSIDERATIONSPREFERENTIAL ACCESSPRICE BEHAVIORPRICE INDEXPRICE MOVEMENTSPRICE SENSITIVITYPRIMARY MARKETPRINCIPAL-AGENT PROBLEMSPRIVATE BANKPRIVATE PROPERTYPRIVATE SECTOR DEVELOPMENTPROPERTY RIGHTSPRUDENTIAL REGULATIONPRUDENTIAL STANDARDSPUBLIC POLICYRATING AGENCIESREGULATORSREGULATORY AUTHORITIESREGULATORY CAPITALREGULATORY FRAMEWORKSREGULATORY REPORTSREGULATORY RESTRICTIONSREGULATORY STANDARDSRETAILRETURNRISK ASSESSMENT PROCESSESRISK EXPOSURESRISK MANAGEMENTRISK MANAGEMENT SYSTEMSRISK MANAGERSRISK OF DEFAULTRISK PROFILESAFETY NETSAFETY NETSSECONDARY MARKETSECURITIESSECURITY PRICESSHARE PRICESHAREHOLDERSSHORT-TERM REPOSSHORT-TERM YIELDSOLVENCYSPREADSTATISTICAL ANALYSISSTOCK PRICESUBORDINATED DEBTSUPERVISORY AUTHORITIESSYSTEMIC RISKSYSTEMIC RISKSTIER 1 CAPITALTRADINGTRANSPARENCYTREASURYTYPES OF INSTRUMENTSUNSECURED DEBTVOLATILITYWORKING CAPITALWorld Bank10.1596/1813-9450-5227