Monday, August 09, 2004

The Hindu Business Line : Moral hazard explained ON GTB

The Hindu Business Line : Moral hazard explained: "The proposed acquisition by OBC will ensure that GTB depositors will get their money in full. Experts claim that protecting GTB depositors sends wrong signals to other banks. Why?
This decision may lead other banks to think that they will be bailed out too if their loans turn bad. So, they may actively seek high-risk clients. After all, such clients pay higher interest rate. That is the moral hazard experts are talking about"

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