Biography:

In the past Anthony M. Santomero has collaborated on articles with J.Spencer Martin. One of their most recent publications is 3 - The Bank Capital Issue. Which was published in journal .

More information about Anthony M. Santomero research including statistics on their citations can be found on their Copernicus Academic profile page.

Anthony M. Santomero's Articles: (3)

3 - The Bank Capital Issue

Publisher SummaryThis chapter provides an overview on bank capital issue. Intermediation theorists often have different views of the leverage issue, as a result of their own perspective on the role performed by banks in the real economy. This has resulted in several different views of the banking firm's decision process applicable to the determination of optimal bank capital ratios, and increased interest in the public policy consequences of whatever decision it reaches. The dichotomy of perspective, which roughly corresponds to a firm level focus and a financial market focus, respectively, has led to discussions of bank capital and its regulation that are often at cross purposes. Some have argued that the government should merely eliminate the inefficiencies of bank regulation and liability insurance to allow the marketplace to efficiently regulate bank capital ratios. The chapter also presents the conclusions and implications of potential competition in regulation as envisioned in the EC for efficiency of regulation.

Investment opportunities and corporate demand for lines of credit

AbstractThe behavior of a risk neutral corporation in selection of a line of credit is modeled in a new framework where demand for credit lines by a firm arises from the stochastic arrival in continuous time of short-lived opportunities to capture investment projects. The firm needs speed and secrecy to capture projects before competitors. The firm chooses a credit line that balances its up-front commitment cost against the expected extra cost of borrowing in the spot market upon exhaustion of its credit line. The firm's demanded credit line depends upon both relative pricing within the contract and the nature of the firm's growth opportunities. Interestingly, while credit line demand is positively related to business growth prospects, it is potentially negatively related to uncertainty in those prospects.

Is there an optimal size for the financial sector?

AbstractThis paper derives the optimal size of the financial sector using a general equilibrium framework that is an extension of the paper of Holmstrom and Tirole (1997) [Quarterly Journal of Economics 112, 663–691]. We show that the financial sector has a unique optimal size relative to the size of the economy as a whole. Creating and maintaining this sector requires diversion of some physical capital from production of output to monitoring that production. However, the efficiency gain in output production brought about by monitoring warrants the diversion. It is also found that the optimal size of the financial sector is independent of the state of the economy and does not vary over the business cycle.

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