A PERSPECTIVE IN LIGHT OF THE FINNISH BAN KING CRISIS

Project-specific monitoring is the central social role of banks in the economy. Project-specific monitoring produces the necessary informati on whereby risks are evaluated so as to determine the allocation of in vestments in the economy. in order to evaluate the consequences of inc reased competition in banking markets it is important to explore the r elationship between banks' incentives for costly information acquisiti on based on ex ante monitoring efforts and the state of competition in the banking industry. The banks' investments in project-specific moni toring represent a central determinant of the stability of loan market s.