How can the Invisible Hand Strengthen Prudential Supervision?

Abstract

How can financial system stability best be achieved? By reliance on market discipline? Or by imposing a complex system of official supervision? This seminar outlines the costs and benefits of these two approaches and discusses systems that potentially incorporate the best features of both.Richard Herring is Jacob Safra Professor of International Banking at the University of Pennsylvania's Wharton School where he also serves as Director of The Joseph H. Lauder Institute of Management and International Studies and Co-Director of the Wharton Financial Institutions Center. His principal research interests are in international banking and finance