Basel III capital requirements and heterogeneous banks

Arbeitspapier

I develop a theoretical model to examine the effect of capital requirements on risk taking and market structure of banks. Within a portfolio choice model, I allow for heterogeneous productivity among banks and consider the simultaneous capital regulation with a leverage ratio and a risk-weighted ratio. Regulators face a trade-off between the efficient allocation of resources and financial stability. In an oligopolistic market, risk-weighted requirements incentivise banks with high productivity to lend to low-risk firms. When a leverage ratio is introduced, these banks lose market shares to less productive competitors and react with risk-shifting into high-risk loans. While average productivity in the low-risk market falls, market shares in the high-risk market are dispersed across new entrants with high as well as low productivity.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: IWH Discussion Papers ; No. 14/2018

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: banking regulation ; heterogeneous banks ; banking competition ; capital requirements ; leverage ratio ; Basel III

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Müller, Carola
• Ereignis: Veröffentlichung
• (wer): Leibniz-Institut für Wirtschaftsforschung Halle (IWH)
• (wo): Halle (Saale)
• (wann): 2018

Weitere Informationen

• Handle: http://hdl.handle.net/10419/184998
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ