Hurtubia, Jaime; Sardoni, Claudio - Banco Central de Chile - 2011
We present a model where a regulator has to decide how to tackle the potential insolvency of a bank in a context of … asymmetric information. We show that, when it can audit the bank, the regulator is unlikely to choose a policy of bailout to … induce the bank to reveal its insolvency. We show that, in some circumstances, the regulator can induce the bank to reveal …