Template-Type: ReDIF-Paper 1.0
Title: Smart Banks
Author-Name: Alkis Georgiadis-Harris
Author-Email: alkisgharris@gmail.com
Author-Name: Maxi Guennewig
Author-Email: m.guennewig@uni-bonn.de
Author-Name: Yuliyan Mitkov
Author-Email: ymitkov@uni-bonn.de

Classification-JEL: D82, G2
Keywords: Bank runs, őnancial fragility, mechanism design, limited commitment,
smart contracts.

Abstract: Since Diamond and Dybvig (1983), banks have been viewed as inherently fragile. We
challenge this view in a general mechanism design framework, where we allow for ŕexibility
in the design of banking mechanisms while maintaining limited commitment of
the intermediary to future mechanisms. We őnd that the unique equilibrium outcome is
efficient. Consequently, runs cannot occur in equilibrium. Our analysis points to the ultimate
source of fragility: banks are fragile if they cannot collect and optimally respond
to useful information during a run and not because they engage in maturity transformation.
We link our banking mechanisms to recent technological advances surrounding
‘smart contracts,’ which enrich the practical possibilities for banking arrangements.

Note: 
Length: 42
Creation-Date: 2024-04
Revision-Date: 
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp540
File-Format: application/pdf
Handle: RePEc:bon:boncrc:CRCTR224_2024_540