 The impact of regulatory reforms on European bank behaviour: A dynamic structural estimationLaurence Jones, Rasha Alsakka, Owain ap Gwilym and Noemi Mantovan European Economic Review, 2022, vol. 150, issue C Abstract: This paper develops a dynamic structural model of bank behaviour. Banks can vary their financing structure, business model and decide on rating solicitation, in the presence of costly debt, corporation tax, insolvency costs and convex adjustment costs. The model is then simulated to examine the impact of regulation on banks’ behaviour. A bail-in regime leads to reduced bank lending activity, while having little impact on bank insolvency rates. Stringent capital requirements reduce bank insolvency rates in a crisis period, while mitigating the reduction in lending activity due to an increased uptake in marginal investments. More lenient credit ratings are associated with increased bank failures. These findings offer wide-ranging implications for policy makers and the banking industry. Keywords: Discrete choice dynamic programming (DCDP); Bank behaviour; Bail-in regime; Basel III regulation; Credit rating regulation (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:150:y:2022:i:c:s0014292122001684 DOI: 10.1016/j.euroecorev.2022.104280 Access Statistics for this article European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer More articles in European Economic Review from Elsevier |
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