Capital requirements, market structure, and heterogeneous banks / Carola Müller
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Capital requirements, market structure, and heterogeneous banks
Discovery
1801720584
URN
urn:nbn:de:gbv:3:2-880694
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Publication history
Halle (Saale), Germany : Halle Institute for Economic Research (IWH) - Member of the Leibniz Association, [12. Mai 2022]
Content
1 Online-Ressource (III, 54 Seiten, 2,55 MB) : Diagramm
Edition
Language
eng
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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.
Series
IWH-Diskussionspapiere ; 2022, no. 15 ppn:837399270