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Rondetafelbijeenkomst NILG

Rondetafelbijeenkomst NILG. Paper Financiele Markten Discussant: Oscar Couwenberg. Two major points. Rife with agency problems Ubiquitousness of information problems Agency theory:

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Rondetafelbijeenkomst NILG

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  1. Rondetafelbijeenkomst NILG Paper Financiele Markten Discussant: Oscar Couwenberg

  2. Two major points • Rife with agency problems • Ubiquitousness of information problems • Agency theory: • Goal incongruence between two players, opportunistic tendencies and information asymmetry leads to suboptimal decisions • Main governance instruments are incentives, monitoring systems and bonding

  3. Agency problems in financial sector • Client – broker/investment advisor • Employee – Boss • Client – Financial institution • Financial institution - Supervisor • Board – Shareholders • Supervisor – Public/Politics

  4. Information problems: Financial expertise advisor Insider institution supervisor client general public outsider Lack of that

  5. Toxic mix • Adverse incentives on all levels, in all firms and in all relationships • Supervisors may mitigate some of them, financial transparancy helps but does not solve it either • Consumer protection leads to moral hazard and adverse selection, i.e. yields wrong incentives on the side of the consumer • Contractual spill over: it is not one single contract that generates specific, generic and systemic problems, but the interplay of these contracts together

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