Implicit and explicit norms and tools of safety net management

What is it about?

Safety-net contracts authorize unlucky financial institutions and customers to transfer some or all of what would otherwise be ruinous losses to taxpayers in other sectors. Safety-net managers” capacity to do this is based on a series of unspoken and slowly varying cultural norms that govern when government support is supplied to an insolvent bank, in what forms, on what terms, and under what limitations. Identifying similarities in the norms that hold sway in the US and China is the heart of this paper.

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