On Banking Regulation and Lobbying

Hans Gersbach and Stylianos Papageorgiou ()
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Stylianos Papageorgiou: University of Cyprus, Cyprus

No 19/308, CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich

Abstract: We study the political economy of bank capital regulation from a positive and normative perspective. In a general equilibrium setting, capital requirements and lobbying contributions are determined as the outcome of bargaining between banks and politicians. We show that bankers and politicians agree on lobbying contributions and capital regulation that renders banks fragile, reducing efficiency and fairness. Consideration of all general equilibrium effects, or a bail-in provision and high capital regulation standards from international agreements eliminate lobbying incentives, yielding an efficient and fair allocation.

Keywords: Banking regulation; lobbying; regulatory capture; capital requirements; bank resolution; risk-taking. (search for similar items in EconPapers)
JEL-codes: D53 D72 G21 G28 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2019-01
New Economics Papers: this item is included in nep-ban, nep-cba and nep-pol
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Persistent link: https://EconPapers.repec.org/RePEc:eth:wpswif:19-308

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