Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/194131 
Year of Publication: 
2019
Series/Report no.: 
Economics Working Paper Series No. 19/308
Publisher: 
ETH Zurich, CER-ETH - Center of Economic Research, Zurich
Abstract: 
We study the political economy of bank capital regulation from a positive and normative perspective. In a general equilibrium setting, capital requirements and lobbying contributions are determined as the outcome of bargaining between banks and politicians. We show that bankers and politicians agree on lobbying contributions and capital regulation that renders banks fragile, reducing efficiency and fairness. Consideration of all general equilibrium effects, or a bail-in provision and high capital regulation standards from international agreements eliminate lobbying incentives, yielding an efficient and fair allocation.
Subjects: 
Banking regulation
lobbying
regulatory capture
capital requirements
bank resolution
risk-taking
JEL: 
D53
D72
G21
G28
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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