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CATEGORIES:Cambridge Finance Workshop Series
SUMMARY:Asset Transfer Measurement Rules - Lucas Mahieux (
 Tilburg School of Economics and Management)
DTSTART;TZID=Europe/London:20210617T130000
DTEND;TZID=Europe/London:20210617T140000
UID:TALK150304AThttp://talks.cam.ac.uk
URL:http://talks.cam.ac.uk/talk/index/150304
DESCRIPTION:We study the design of measurement rules when bank
 s engage in loan transfers in secondary credit mar
 kets. Our model incorporates two standard friction
 s: 1) banks' monitoring incentives decrease in loa
 n transfers\, and 2) banks have private informatio
 n about loan quality. Under only the monitoring fr
 iction\, we find that the optimal measurement rule
  sets the same measurement precision regardless of
  bank characteristics\, and strikes a balance betw
 een disciplining banks' monitoring efforts vs. fac
 ilitating efficient risk sharing. However\, under 
 both frictions\, uniform measurement rules are no 
 longer optimal but induce excessive retention\, th
 us inhibiting efficient risk sharing. We show that
  the optimal measurement rule should be contingent
  on the amount of loan transfers. In particular\, 
 measurement decreases in the amount of loan transf
 ers and no measurement should be allowed when bank
 s have transferred most of their loans. We relate 
 our results to current accounting standards for as
 set transfers.
LOCATION:Online
CONTACT:CERF/CF Admin
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