Weaker shareholder liability need not mean more risk-taking, Riksbank paper finds
Authors find depositors held their banks to account
Reducing the incentive for shareholders to hold their banks to account need not entail an increase in bank risk-taking, according to research published on February 4 by Sweden's Sveriges Riksbank.
The working paper, Double Liability in a Branch Banking System: Historical Evidence from Canada, by Anna Grodecka and Antonis Kotidis, examines the phase-out of double liability after the Bank of Canada was established in 1934. Double liability saw shareholders liable for double their investment in
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