Capital requirements, market structure, and heterogeneous banks

Arbeitspapier

Bank regulators interfere with the efficient allocation of resources for the sake of financial stability. Based on this trade-off, I compare how different capital requirements affect default probabilities and the allocation of market shares across heterogeneous banks. In the model, banks' productivity determines their optimal strategy in oligopolistic markets. Higher productivity gives banks higher profit margins that lower their default risk. Hence, capital requirements indirectly aiming at highproductivity banks are less effective. They also bear a distortionary cost: Because incumbents increase interest rates, new entrants with low productivity are attracted and thus average productivity in the banking market decreases.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: IWH Discussion Papers ; No. 15/2022

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Portfolio Choice; Investment Decisions ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Financial Institutions and Services: Government Policy and Regulation
• Thema: bank competition ; bank regulation ; Basel III ; capital requirements ; heterogeneous banks ; leverage ratio

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Müller, Carola
• Ereignis: Veröffentlichung
• (wer): Halle Institute for Economic Research (IWH)
• (wo): Halle (Saale)
• (wann): 2022

Weitere Informationen

• Handle: http://hdl.handle.net/10419/256924
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ