“Traditional theory suggests that a bank’s concern for its franchise value limits the bank’s excessive risk-taking. Howe
Posted: Wed Jul 06, 2022 6:40 pm
“Traditional theory suggests that a bank’s concern for its franchise value limits the bank’s excessive risk-taking. However, in the last financial crisis many banks with exceptionally valuable franchises got exposed to new financial instruments and excessive risk, resulting in significant bank losses during the crisis.” Discuss, using the literature on competition and risk taking in banking.