The Economics of the Money and Banking
ECON0038 AY 2022/23
Module leader: Dr Silvia Dal Bianco
Coursework: Individual Essay, worth 65 of module final mark
Submission: Turnitin Link
Submission Deadline: Friday March 24th 2023 12:00 pm (noon), London time
Assignment: write an essay EITHER on Question 1 OR on Question 2
You need to provide JUST ONE ANSWER TO ONE QUESTION
Please check the Assessment’s coversheet for word-count and other instructions
Question 1
Since the Great Depression policymakers have struggled to define the right mix of
competition rules and regulations that should enable both financial stability and the efficient
functioning of the banking industry.
Discuss this statement and explain which regulatory framework you would establish for
mitigating the potential negative effects of competition on stability.
Explain your answer clearly using economic analysis, empirical evidence and real world
examples to support your discussion.
Reference: Beck, T. H. L., Coyle, D., Dewatripont, M., Freixas, X., & Seabright, P. (2010). Bailing
out the Banks: Reconciling Stability and Competition. (CEPR Report). CEPR.
Question 2
Alessandri and Haldane (2009) affirm that there is a doom loop in retail banking regulation.
Their ideas can be summarised as follows: while governments say “never again” to the
prospect of intervening to save financial institutions from the costs of their bad business
decisions, bankers don’t believe them. Bankers therefore double their bets and banks grow
bigger and bigger. This adds to the cost of future crises. And the larger these costs, the lower
the credibility of ‘never again’ announcements. This is a doom loop (authors’ words in italics).
Provide an economic explanation of this doom loop in regulation of retail banking and explain
the consequences on this doom loop for the design of banking regulation.
Explain your answer clearly using economic analysis, empirical evidence and real world
examples to support your discussion.
Reference: Alessandri, P. and Haldane, A. G. (2009). Banking on the state. Speech delivered at
the Federal Reserve Bank of Chicago 12th Annual International Banking Conference , Nov 6.
1
ECON0038 AY 2022/23
Module leader: Dr Silvia Dal Bianco
Coursework: Individual Essay, worth 65 of module final mark
Submission: Turnitin Link
Submission Deadline: Friday March 24th 2023 12:00 pm (noon), London time
Assignment: write an essay EITHER on Question 1 OR on Question 2
You need to provide JUST ONE ANSWER TO ONE QUESTION
Please check the Assessment’s coversheet for word-count and other instructions
Question 1
Since the Great Depression policymakers have struggled to define the right mix of
competition rules and regulations that should enable both financial stability and the efficient
functioning of the banking industry.
Discuss this statement and explain which regulatory framework you would establish for
mitigating the potential negative effects of competition on stability.
Explain your answer clearly using economic analysis, empirical evidence and real world
examples to support your discussion.
Reference: Beck, T. H. L., Coyle, D., Dewatripont, M., Freixas, X., & Seabright, P. (2010). Bailing
out the Banks: Reconciling Stability and Competition. (CEPR Report). CEPR.
Question 2
Alessandri and Haldane (2009) affirm that there is a doom loop in retail banking regulation.
Their ideas can be summarised as follows: while governments say “never again” to the
prospect of intervening to save financial institutions from the costs of their bad business
decisions, bankers don’t believe them. Bankers therefore double their bets and banks grow
bigger and bigger. This adds to the cost of future crises. And the larger these costs, the lower
the credibility of ‘never again’ announcements. This is a doom loop (authors’ words in italics).
Provide an economic explanation of this doom loop in regulation of retail banking and explain
the consequences on this doom loop for the design of banking regulation.
Explain your answer clearly using economic analysis, empirical evidence and real world
examples to support your discussion.
Reference: Alessandri, P. and Haldane, A. G. (2009). Banking on the state. Speech delivered at
the Federal Reserve Bank of Chicago 12th Annual International Banking Conference , Nov 6.
1
