Arbeitspapier

The regulator's trade-off: Bank supervision vs. minimum capital

We develop a simple model of banking regulation with two policy instruments: minimum capital requirements and supervision of domestic banks. The regulator faces a trade-off: high capital requirements cause a drop in the banks'; profitability, while strict supervision reduces the scope of intermediation and is costly for taxpayers. We show that the expected costs of a banking crisis are minimised with a mix of both instruments. Once we allow for cross-border banking, the optimal policy is not feasible. If domestic supervisory effort is not observable, our model predicts a race to the bottom in banking regulation. Therefore, countries are better off by harmonising regulation on an international standard.

Sprache
Englisch

Erschienen in
Series: CESifo Working Paper ; No. 3923

Klassifikation
Wirtschaft
Financial Aspects of Economic Integration
General Financial Markets: Government Policy and Regulation
Regulated Industries and Administrative Law
Economics of Regulation
Thema
bank regulation
regulatory competition
supervision and capital requirements
Bankenpolitik
Basler Akkord
Bankenaufsicht
Policy-Mix
Bankenkrise
Institutioneller Wettbewerb
Theorie

Ereignis
Geistige Schöpfung
(wer)
Buck, Florian
Schliephake, Eva
Ereignis
Veröffentlichung
(wer)
Center for Economic Studies and ifo Institute (CESifo)
(wo)
Munich
(wann)
2012

Handle
Letzte Aktualisierung
10.03.2025, 11:43 MEZ

Datenpartner

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Objekttyp

  • Arbeitspapier

Beteiligte

  • Buck, Florian
  • Schliephake, Eva
  • Center for Economic Studies and ifo Institute (CESifo)

Entstanden

  • 2012

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