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The Spillover Effects of Prudential Regulation on Banking Competition

The Spillover Effects of Prudential Regulation on Banking Competition
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Year:    2020

Author:    Ferri, Giovanni, Pesic, Valerio

Vierteljahrshefte zur Wirtschaftsforschung, Vol. 89 (2020), Iss. 1 : pp. 59–100

Abstract

Summary: European supervisors aggressively requested more capital at large banks. That may cut credit to the economy. We confirm that especially larger banks cut loans while less-significant banks partly offset that credit drop. Moreover, we identify nasty spillovers from that interaction. Specifically, larger banks’ deleveraging was associated with significant portfolio worsening for mid-sized banks. We conjecture that while small banks’ loan expansion was somewhat shielded by superior soft-information-based technologies, medium-sized banks were fully exposed to lending to bad borrowers as they boosted loans by relying on credit scoring and Internal Rating Based models. That is proving tricky through the prolonged European dip.

Journal Article Details

Publisher Name:    Global Science Press

Language:    English

DOI:    https://doi.org/10.3790/vjh.89.1.59

Vierteljahrshefte zur Wirtschaftsforschung, Vol. 89 (2020), Iss. 1 : pp. 59–100

Published online:    2020-01

AMS Subject Headings:    Duncker & Humblot, Duncker & Humblot

Copyright:    COPYRIGHT: © Global Science Press

Pages:    41

Keywords:    G2 G21 G28. Bank Credit bank capital requirements prudential regulation mid-sized banks spillover effects europe business cycle.

Author Details

Ferri, Giovanni

Pesic, Valerio

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