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SUMMARY:Asset Transfer Measurement Rules - Lucas Mahieux (Tilburg School o
 f Economics and Management)
DTSTART:20210617T120000Z
DTEND:20210617T130000Z
UID:TALK150304@talks.cam.ac.uk
CONTACT:CERF/CF Admin
DESCRIPTION:We study the design of measurement rules when banks engage in 
 loan transfers in secondary credit markets. Our model incorporates two sta
 ndard frictions: 1) banks' monitoring incentives decrease in loan transfer
 s\, and 2) banks have private information about loan quality. Under only t
 he monitoring friction\, we find that the optimal measurement rule sets th
 e same measurement precision regardless of bank characteristics\, and stri
 kes a balance between disciplining banks' monitoring efforts vs. facilitat
 ing efficient risk sharing. However\, under both frictions\, uniform measu
 rement rules are no longer optimal but induce excessive retention\, thus i
 nhibiting efficient risk sharing. We show that the optimal measurement rul
 e should be contingent on the amount of loan transfers. In particular\, me
 asurement decreases in the amount of loan transfers and no measurement sho
 uld be allowed when banks have transferred most of their loans. We relate 
 our results to current accounting standards for asset transfers.
LOCATION:Online
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