This paper considers why a manager would choose to submit himself to the discipline of bank monitoring. This issue is analyzed within the context of a model where the manager enjoys private benefits, which can be restricted by the monitor, and is optimally compensated by shareholders. Within...

This paper presents a model of a bank subject to liquidity shocks that require borrowing from a lender of last resort. Two government agencies with different objectives may perform this function: a central bank and a deposit insurance corporation. Both agencies supervise the bank, i.e. collect...