Who should decide on LoLR support?
The central bank should always decide whether to provide an emergency loan but must require the banking supervisor/deposit insurance agency to guarantee unconditional bailouts, writes Jorge Ponce, a research economist at the Central Bank of Uruguay, on Voxeu.org, an economics blog.
Ponce shows that this would reduce taxpayers' exposure as the deposit insurance scheme is financed by the banking industry. He also shows that the deposit insurance agency would have the incentives to improve the
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