Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/274728 
Year of Publication: 
2022
Citation: 
[Journal:] Journal of Risk and Financial Management [ISSN:] 1911-8074 [Volume:] 15 [Issue:] 5 [Article No.:] 206 [Year:] 2022 [Pages:] 1-32
Publisher: 
MDPI, Basel
Abstract: 
We develop a dynamic model of a BHC that encompasses both a trading desk and a loan desk, and explore the role of risk attitude and overleveraging by the trading desk. We trace the impact of monetary policy and market innovations on bank behavior in the presence of Basel III type regulations. We show that the value of the BHC is enhanced by operating both desks. We explore alternative regulatory remedies to ongoing efforts to ring-fence the proprietary trading business, and show that regulations that target bank governance can mitigate possible rogue trading and the overleveraging problem.
Subjects: 
financial markets
bank capital
bank holding company
banking
Basel III
financial stability
macro prudential
monetary policy
ring-fencing
term structure
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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