Regulatory competition in capital standards with selection effects among banks

Haufler, Andreas and Maier, Ulf (2016) Regulatory competition in capital standards with selection effects among banks. Centre for Business Taxation Working Paper, Oxford.

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Abstract

Several countries have recently introduced national capital standards exceeding the internationally coordinated Basel III rules, which is inconsistent with the `race to the bottom' in capital standards found in the literature. We study regulatory competition when banks are heterogeneous and give loans to firms that
produce output in an integrated market. In this setting capital requirements change the pool quality of banks in each country and inflict negative externalities on neighboring jurisdictions by shifting risks to foreign taxpayers and by reducing total credit supply and output. Non-cooperatively set capital standards are higher than coordinated ones and a `race to the top' occurs when governments
care equally about bank profits, taxpayers, and consumers.

Item Type: Other Working Paper
Keywords: regulatory competition, capital requirements, bank heterogeneity
Subject(s): Taxation
Centre: Oxford University Centre for Business Taxation > CBT Working Papers
Date Deposited: 08 Feb 2019 12:55
Last Modified: 08 Feb 2019 12:55
Funders: German Research Foundation Grant no HA3195/9-1
URI: http://eureka.sbs.ox.ac.uk/id/eprint/7297

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