Capital regulation and competition as a moderator for banking stability

Resultado de pesquisarevisão de pares

14 Citações (Scopus)

Resumo

Capital regulation forces banks to fund a substantial amount of their investments with equity. This creates a buffer against losses but also increases the cost of funding. If higher funding costs translate into higher loan interest rates, the bank's assets are also likely to become more risky, which may destabilize the lending bank. This paper argues that the level of competition in the banking sector can determine whether the buffer or cost effect prevails. The endogenous level of competition may be crucial in determining the efficiency of capital regulation in undercapitalized banking sectors, with excess capacities and correlated risks.
Idioma originalEnglish
Páginas (de-até)1787-1814
Número de páginas28
RevistaJournal of Money, Credit and Banking
Volume48
Número de emissão8
DOIs
Estado da publicaçãoPublished - 1 dez 2016
Publicado externamenteSim

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