Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/186028
Authors: 
Junge, Georg
Kugler, Peter
Year of Publication: 
2013
Citation: 
[Journal:] Swiss Journal of Economics and Statistics [ISSN:] 2235-6282 [Volume:] 149 [Year:] 2013 [Issue:] 3 [Pages:] 313-356
Publisher: 
Springer, Heidelberg
Abstract: 
So far the discussion in Switzerland about the social costs and benefits of higher capital requirements resulting from the new Basel III Accord and the Swiss Too Big To Fail legislation has been heavily qualitative. This paper provides a quantitative view and estimates the long-run costs and benefits of substantially higher capital requirements using empirical evidence on Swiss banks to assess both benefits and costs. The analysis yields two main conclusions. The long-run economic benefits of higher capital requirements are substantial for the Swiss economy leading to a significantly lower probability of banking crises and associated expected losses. In contrast the costs of higher capital requirements as reflected in increased lending spreads and potential output reductions are literally non-existent.
Subjects: 
capital regulation
banks
cost of equity
banking crisis
economic growth
Modigliani-Miller
JEL: 
G21
G28
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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