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Contagious Effect of the Fees for the Consolidated Financial Services under the Asymmetric Information
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  • Contagious Effect of the Fees for the Consolidated Financial Services under the Asymmetric Information
  • Contagious Effect of the Fees for the Consolidated Financial Services under the Asymmetric Information
저자명
Song. Soo-Young,Hwang. Sun-Wung
간행물명
財務官理硏究= The Korean journal of financial management
권/호정보
2009년|26권 4호|pp.83-102 (20 pages)
발행정보
한국재무관리학회
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정기간행물|ENG|
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이 논문은 한국과학기술정보연구원과 논문 연계를 통해 무료로 제공되는 원문입니다.
서지반출

기타언어초록

Banks traditionally focus on the financial services against the uncertain future liquidity needs, i.e. saving as well as lending. As the business model of banks has been shifted from the originate to hold model to the originate to distribute model since the enactment of Gramm-Leach-Bliley Financial Services Modernization Act in 1999, the financial services encompass information gathering and generating, underwriting and risk sharing through packaging claims for the investors, in addition to the payment and settlement services. Ensued are the financial market integration and diversification of financial services, with which the accessibility to financial services is arguably significantly enhanced. Such integration and diversification necessarily entails the risk of contagion due to the non-fulfilling service over the several other financial services, which would be contained easily under the separate financial services. This paper addresses the pricing of fees for the integrated financial services through which the contagion could spread when the users of financial service are not immune to the failure to fulfill their obligation due to the economic turmoil. Consequently the information asymmetry about the clients is unavoidable. Higher fees could drive out the otherwise good clients out of the pool of customers for the financial services. Then, the risk could be exacerbated due to the proliferation of bad clients who are vulnerable to the financial distress and liquidity crunch. So the banks should take into account the interactional effect of the fees between/among the non interest based activities and interest based activities under the information asymmetry. Contrary to our general perception, the current analysis demonstrates that the bank should focus on the reduction of cost associated with good clients rather than that of bad clients.