Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/256924 
Authors: 
Year of Publication: 
2022
Series/Report no.: 
IWH Discussion Papers No. 15/2022
Publisher: 
Halle Institute for Economic Research (IWH), Halle (Saale)
Abstract: 
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.
Subjects: 
bank competition
bank regulation
Basel III
capital requirements
heterogeneous banks
leverage ratio
JEL: 
G11
G21
G28
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.