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Traditional theory suggests that a banks concern for its franchise value limits the banks excessive risk-taking. However, in the last financial crisis many banks with
Traditional theory suggests that a banks concern for its franchise value limits the banks excessive risk-taking. However, in the last financial crisis many banks with exceptionally valuable franchises got exposed to new financial instruments and excessive risk, resulting in significant bank losses during the crisis. Discuss, using the literature on competition and risk taking in banking.
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