Arbeitspapier
The Limits of Model-Based Regulation
Using loan-level data from Germany, we investigate how the introduction of model-based capital regulation affected banks' ability to absorb shocks. The objective of this regulation was to enhance financial stability by making capital requirements responsive to asset risk. Our evidence suggests that banks 'optimized' model-based regulation to lower their capital requirements. Banks systematically underreported risk, with under reporting being more pronounced for banks with higher gains from it. Moreover, large banks benefitted from the regulation at the expense of smaller banks. Overall, our results suggest that sophisticated rules may have undesired effects if strategic misbehavior is difficult to detect.
- Sprache
-
Englisch
- Erschienen in
-
Series: LawFin Working Paper ; No. 20
- Klassifikation
-
Wirtschaft
Financial Crises
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
Financial Institutions and Services: Government Policy and Regulation
- Thema
-
capital regulation
internal ratings
complexity of regulation
Basel regulation
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Behn, Markus
Haselmann, Rainer
Vig, Vikrant
- Ereignis
-
Veröffentlichung
- (wer)
-
Goethe University, Center for Advanced Studies on the Foundations of Law and Finance (LawFin)
- (wo)
-
Frankfurt a. M.
- (wann)
-
2021
- Handle
- URN
-
urn:nbn:de:hebis:30:3-616608
- Letzte Aktualisierung
-
10.03.2025, 11:43 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Behn, Markus
- Haselmann, Rainer
- Vig, Vikrant
- Goethe University, Center for Advanced Studies on the Foundations of Law and Finance (LawFin)
Entstanden
- 2021
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