 Regulatory competition in banking: Curse or blessing?Hans Gersbach, Hans Haller and Stylianos Papageorgiou Journal of Banking & Finance, 2020, vol. 121, issue C Abstract: In a two-country general equilibrium setting, we study competition between governments with two policy tools: capital requirements and a bank tax. Since banks raise equity and deposits from domestic and foreign households, governments face cross-country externalities the sign of which depends on the extent of positive spillovers, i.e., revenues from taxing banks, and negative spillovers, i.e., deposit guarantee costs. We show that regulatory competition yields the efficient allocation when governments have at their disposal policy tools that enable them to optimally internalize domestic distortions. Our first finding is that this is the case when governments are not restricted by supranational regulation. Our second finding is that supranational regulation may or may not impede efficiency. This conclusion is the result of a detailed analysis where we consider conceivable supranational regulatory schemes, derive their welfare implications and identify those that cause inefficiencies. Keywords: Regulatory competition; General equilibrium; Cross-country externality; Capital requirements; Bank tax; Deposit guarantees (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:jbfina:v:121:y:2020:i:c:s0378426620302168 DOI: 10.1016/j.jbankfin.2020.105954 Access Statistics for this article Journal of Banking & Finance is currently edited by Ike Mathur More articles in Journal of Banking & Finance from Elsevier |
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