The papers in this volume were presented at three invited sessions at the annual meeting of the Western Economic Association in Lake Tahoe, Nevada on June 30 and July 1, 1998. The comments of the speaker at each of these sessions are also included. The papers focus on the widespread banking and financial crises that have plagued many countries worldwide. A study by the International Monetary Fund (Lindgren, Garcia, & Saal, 1996) reported that banking crises had been experienced by nearly three-quarters of its 180-plus member countries since 1980. And this was before the current problems in...

This volume focuses on problems in banking that have the potential not only for disrupting the smooth provision of banking and other financial services, but also for adversely affecting domestic and even international macroeconomic activity. Because serious banking problems have been experienced by most countries, the papers both focus on fragility and regulation in different countries and are authored by leading financial economists in six different countries including Belgium, Germany, Italy, The Netherlands, the United Kingdom and the United States. By providing an international...

Asset price bubbles have been and continue to be an area of major public policy concern in many countries. But while we know that the bursting of such bubbles is exceedingly painful and destructive to the economy, little is known of their causes. Indeed, there is little agreement even on the definition of a bubble and whether, whatever it is, is economically rational or irrational and reflect temporary excessive exuberance. Can bubbles be identified ex-ante before they burst? Often, one person's perceived bubble is another's perceived equilibrium price path. How and when is a bubble...

It has become increasingly evident in recent years that the safe and the efficient operation of the banking system cannot be guaranteed by Government regulation and supervisory review alone, regardless of how conscientious the regulator, or well-intended the regulations. Government regulation needs to be supplemented by market discipline. Market discipline requires the existence of at least some "de-facto at-risk" bank stakeholders, who have an incentive both to monitor the financial performance of the banks and to take action to influence bank management if they find performance...

In December 1991, the U.S. Congress enacted and President George Bush signed the Federal Deposit Insurance Corporation Improvement Act (FDICIA). The Act was motivated by the severity of the U.S. banking and thrift crisis of the 1980s and represented the most important banking legislation since the Banking (Glass-Steagall) Act, which was enacted in 1933 at the depth of the previous most severe banking crisis in U.S. history. Between 1980 and 1991, some 1,500 commercial and savings banks, representing 10 percent of the industry in 1980, failed and more than 1,000 savings and loan associations,...