Allocating Lending of Last Resort and Supervision in the Euro Area

Charles M. Kahn, João A.C. Santos

Research output: Chapter in Book/Report/Conference proceedingChapter


The Maastricht Treaty created the European System of Central Banks and the European Central Bank (ECB) to head the system. The treaty entrusts the ECB with the responsibility for monetary policy, but national authorities remain responsible for financial stability. In this chapter, we focus on the implications of national versus central assignment of lender-of-lastresort and supervisory functions for the degree of forbearance in closing distressed banks and for the level of diligence in bank supervision. One major conclusion is that, if only one of the two functions is centralized, then it will be more effective to centralize the supervisory function.

Original languageEnglish (US)
Title of host publicationMonetary Unions and Hard Pegs
Subtitle of host publicationEffects on Trade, Financial Development, and Stability
PublisherOxford University Press
ISBN (Electronic)9780191601200
ISBN (Print)0199271402, 9780199271405
StatePublished - Aug 1 2004


  • Assignment problem
  • Banking supervision
  • European central bank
  • European system of central banks
  • Incentive compatibility
  • Lender of last resort
  • Maastricht treaty
  • Regulatory theory

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)


Dive into the research topics of 'Allocating Lending of Last Resort and Supervision in the Euro Area'. Together they form a unique fingerprint.

Cite this