The Roles of Banks in Financial Systems

Bibliographic Data

ID23628979
AuthorsF Allen (0000-0003-2706-3872, University of Pennsylvania), Elena Carletti (0009-0000-0172-0286, European University Institute), Xian Gu (0000-0003-1409-7838, University of Pennsylvania)
Year2019
Pages40-61
Publication date2019-11-06
Peer ReviewedYes
Open AccessNo
TypeCHAPTER
VenueOxford Handbook of Banking (SOURCE_BOOK)
PublisherOxford University Press (PUBLISHER • GB)
DOI10.1093/oxfordhb/9780198824633.013.2
OpenAlexW4240438830
ISBN9780198824633
LanguageEN
Citations received1
References cited18

Banks perform various roles in the economy. First, they ameliorate the information problems between investors and borrowers by monitoring the latter and ensuring a proper use of the depositors’ funds. Second, they provide intertemporal smoothing of risk that cannot be diversified at a given point in time as well as insurance to depositors against unexpected consumption shocks. Because of the maturity mismatch between their assets and liabilities, however, banks are subject to the possibility of runs and systemic risk. Third, banks contribute to the growth of the economy. Fourth, they perform an important role in corporate governance. The relative importance of the different roles of banks varies substantially across countries and times but banks are always critical to the financial system.

Business · Consumption (sociology) · Consumption smoothing · Corporate governance · Economics · Financial crisis · Financial system · Macroeconomics · Maturity (psychological) · Monetary economics · Point (geometry) · Systemic risk · Banking stability, regulation, efficiency · Finance · Global Financial Crisis and Policies · Islamic Finance and Banking Studies

Tools

Open DOILibgen