What Makes Banks Special? A Study of Banking, Finance, and Economic Development
Over the past decades, finance theory has contributed significantly to understanding banks and identifying what qualifies them to be special financial intermediaries. Historically, banks have had a comparative advantage in certain functions - such...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2000/08/443623/makes-banks-special-study-banking-finance-economic-development http://hdl.handle.net/10986/19815 |
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okr-10986-198152021-04-23T14:03:46Z What Makes Banks Special? A Study of Banking, Finance, and Economic Development Bossone, Biagio ADVERSE SELECTION ALLOCATION OF RESOURCES ASYMMETRIC INFORMATION AUDITING BANK ACCOUNTS BANK ASSETS BANK DEPOSITS BANK FAILURES BANK LENDING BANK LIABILITIES BANK LOANS BANK RUNS BANK SIZE BANKING SECTOR BANKING THEORY BANKRUPTCY BANKS BORROWING BROKERS CAPITAL GOODS CAPITAL MARKETS CENTRAL BANK CENTRAL BANKS CIRCUIT MODEL CIRCULAR FLOW COMMERCIAL BANKS COMPARATIVE ADVANTAGE CONSUMERS CONTRACT ENFORCEMENT CREDIT MARKETS DEBT DEFAULT RISK DEMAND DEPOSITS DEPOSIT ACCOUNTS DEPOSIT TRANSFERS DEPOSITORS DEPOSITS DIRECT FINANCING ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC THEORY ECONOMICS ECONOMICS OF INFORMATION EQUILIBRIUM EXPECTED RETURNS FACTORING FINANCIAL ASSETS FINANCIAL INFRASTRUCTURE FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIATION FINANCIAL LIBERALIZATION FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL SYSTEMS GAME THEORY GOVERNMENT SECURITIES HUMAN CAPITAL ILLIQUIDITY INCOME INFORMATION ASYMMETRIES INSTITUTIONAL DEVELOPMENT INSURANCE INTERBANK PAYMENTS INTEREST RATE LIQUIDATION LIQUIDITY MICROECONOMICS MONETARY POLICY MONEY MULTIPLIER MORAL HAZARD MUTUAL FUND NARROW BANKING NOMINAL CAPITAL NONBANKS PAYMENT SYSTEMS PORTFOLIO DIVERSIFICATION PORTFOLIOS PRIVATE INFORMATION PRODUCERS PRODUCTION TECHNOLOGY PRODUCTIVE ASSETS PROFITABILITY PURCHASING POWER REAL SECTOR RESERVE REQUIREMENTS RISK SHARING SAFETY NETS SAVINGS SECURITIES SETTLEMENT SYSTEMS SUBSIDIARIES TECHNOLOGICAL CHANGE TECHNOLOGICAL PROGRESS TRANSACTION COSTS WAGES Over the past decades, finance theory has contributed significantly to understanding banks and identifying what qualifies them to be special financial intermediaries. Historically, banks have had a comparative advantage in certain functions - such as providing liquidity and payment services and supplying credit and information - which competition, technological change, and institutional development have increasingly eroded. And the spread of e-money could deal a blow to conventional banking, generating entirely new ways of doing finance. After integrating his examination of money, production, and investment, the author argues that banks remain special in that they lend claims on their own debt and the public accepts the debt claims as money. His study shows the banks and nonbank financial intermediaries perform complementary functions essential to the economy. Risk reduction policies in payment systems, banking asset allocation, and the deposit market affect the economy's tradeoff between risk and efficiency and the cost of generating resources to finance production. As possibilities for global communications expand, trust will matter more than ever, and banks and other financial intermediaries will be in a good position to bridge gaps in trust when it comes to creating money and intermediating funds. 2014-08-28T17:20:46Z 2014-08-28T17:20:46Z 2000-08 http://documents.worldbank.org/curated/en/2000/08/443623/makes-banks-special-study-banking-finance-economic-development http://hdl.handle.net/10986/19815 English en_US Policy Research Working Paper;No. 2408 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research |
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Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
ADVERSE SELECTION ALLOCATION OF RESOURCES ASYMMETRIC INFORMATION AUDITING BANK ACCOUNTS BANK ASSETS BANK DEPOSITS BANK FAILURES BANK LENDING BANK LIABILITIES BANK LOANS BANK RUNS BANK SIZE BANKING SECTOR BANKING THEORY BANKRUPTCY BANKS BORROWING BROKERS CAPITAL GOODS CAPITAL MARKETS CENTRAL BANK CENTRAL BANKS CIRCUIT MODEL CIRCULAR FLOW COMMERCIAL BANKS COMPARATIVE ADVANTAGE CONSUMERS CONTRACT ENFORCEMENT CREDIT MARKETS DEBT DEFAULT RISK DEMAND DEPOSITS DEPOSIT ACCOUNTS DEPOSIT TRANSFERS DEPOSITORS DEPOSITS DIRECT FINANCING ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC THEORY ECONOMICS ECONOMICS OF INFORMATION EQUILIBRIUM EXPECTED RETURNS FACTORING FINANCIAL ASSETS FINANCIAL INFRASTRUCTURE FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIATION FINANCIAL LIBERALIZATION FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL SYSTEMS GAME THEORY GOVERNMENT SECURITIES HUMAN CAPITAL ILLIQUIDITY INCOME INFORMATION ASYMMETRIES INSTITUTIONAL DEVELOPMENT INSURANCE INTERBANK PAYMENTS INTEREST RATE LIQUIDATION LIQUIDITY MICROECONOMICS MONETARY POLICY MONEY MULTIPLIER MORAL HAZARD MUTUAL FUND NARROW BANKING NOMINAL CAPITAL NONBANKS PAYMENT SYSTEMS PORTFOLIO DIVERSIFICATION PORTFOLIOS PRIVATE INFORMATION PRODUCERS PRODUCTION TECHNOLOGY PRODUCTIVE ASSETS PROFITABILITY PURCHASING POWER REAL SECTOR RESERVE REQUIREMENTS RISK SHARING SAFETY NETS SAVINGS SECURITIES SETTLEMENT SYSTEMS SUBSIDIARIES TECHNOLOGICAL CHANGE TECHNOLOGICAL PROGRESS TRANSACTION COSTS WAGES |
| spellingShingle |
ADVERSE SELECTION ALLOCATION OF RESOURCES ASYMMETRIC INFORMATION AUDITING BANK ACCOUNTS BANK ASSETS BANK DEPOSITS BANK FAILURES BANK LENDING BANK LIABILITIES BANK LOANS BANK RUNS BANK SIZE BANKING SECTOR BANKING THEORY BANKRUPTCY BANKS BORROWING BROKERS CAPITAL GOODS CAPITAL MARKETS CENTRAL BANK CENTRAL BANKS CIRCUIT MODEL CIRCULAR FLOW COMMERCIAL BANKS COMPARATIVE ADVANTAGE CONSUMERS CONTRACT ENFORCEMENT CREDIT MARKETS DEBT DEFAULT RISK DEMAND DEPOSITS DEPOSIT ACCOUNTS DEPOSIT TRANSFERS DEPOSITORS DEPOSITS DIRECT FINANCING ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC THEORY ECONOMICS ECONOMICS OF INFORMATION EQUILIBRIUM EXPECTED RETURNS FACTORING FINANCIAL ASSETS FINANCIAL INFRASTRUCTURE FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIATION FINANCIAL LIBERALIZATION FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL SYSTEMS GAME THEORY GOVERNMENT SECURITIES HUMAN CAPITAL ILLIQUIDITY INCOME INFORMATION ASYMMETRIES INSTITUTIONAL DEVELOPMENT INSURANCE INTERBANK PAYMENTS INTEREST RATE LIQUIDATION LIQUIDITY MICROECONOMICS MONETARY POLICY MONEY MULTIPLIER MORAL HAZARD MUTUAL FUND NARROW BANKING NOMINAL CAPITAL NONBANKS PAYMENT SYSTEMS PORTFOLIO DIVERSIFICATION PORTFOLIOS PRIVATE INFORMATION PRODUCERS PRODUCTION TECHNOLOGY PRODUCTIVE ASSETS PROFITABILITY PURCHASING POWER REAL SECTOR RESERVE REQUIREMENTS RISK SHARING SAFETY NETS SAVINGS SECURITIES SETTLEMENT SYSTEMS SUBSIDIARIES TECHNOLOGICAL CHANGE TECHNOLOGICAL PROGRESS TRANSACTION COSTS WAGES Bossone, Biagio What Makes Banks Special? A Study of Banking, Finance, and Economic Development |
| relation |
Policy Research Working Paper;No. 2408 |
| description |
Over the past decades, finance theory
has contributed significantly to understanding banks and
identifying what qualifies them to be special financial
intermediaries. Historically, banks have had a comparative
advantage in certain functions - such as providing liquidity
and payment services and supplying credit and information -
which competition, technological change, and institutional
development have increasingly eroded. And the spread of
e-money could deal a blow to conventional banking,
generating entirely new ways of doing finance. After
integrating his examination of money, production, and
investment, the author argues that banks remain special in
that they lend claims on their own debt and the public
accepts the debt claims as money. His study shows the banks
and nonbank financial intermediaries perform complementary
functions essential to the economy. Risk reduction policies
in payment systems, banking asset allocation, and the
deposit market affect the economy's tradeoff between
risk and efficiency and the cost of generating resources to
finance production. As possibilities for global
communications expand, trust will matter more than ever, and
banks and other financial intermediaries will be in a good
position to bridge gaps in trust when it comes to creating
money and intermediating funds. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Bossone, Biagio |
| author_facet |
Bossone, Biagio |
| author_sort |
Bossone, Biagio |
| title |
What Makes Banks Special? A Study of Banking, Finance, and Economic Development |
| title_short |
What Makes Banks Special? A Study of Banking, Finance, and Economic Development |
| title_full |
What Makes Banks Special? A Study of Banking, Finance, and Economic Development |
| title_fullStr |
What Makes Banks Special? A Study of Banking, Finance, and Economic Development |
| title_full_unstemmed |
What Makes Banks Special? A Study of Banking, Finance, and Economic Development |
| title_sort |
what makes banks special? a study of banking, finance, and economic development |
| publisher |
World Bank, Washington, DC |
| publishDate |
2014 |
| url |
http://documents.worldbank.org/curated/en/2000/08/443623/makes-banks-special-study-banking-finance-economic-development http://hdl.handle.net/10986/19815 |
| _version_ |
1764441471630442496 |