Strategic Effects of Regulatory Capital Requirements in Imperfect Banking Competition

Eva Schliephake () and Roland Kirstein

No 100012, FEMM Working Papers from Otto-von-Guericke University Magdeburg, Faculty of Economics and Management

Abstract: This paper analyses the competitive effects of capital requirement regulation on an oligopolistic credit market. In the first stage, banks choose the structure of refinancing their assets, thereby making an imperfect commitment to a loan capacity as a function of the chosen degree of capitalization and the regulatory capital requirement. In the second stage, loan price competition takes place. It is shown that a capital requirement regulation may not only decrease the supply of credit through an increased marginal cost effect but can have an additional collusive enhancing effect resulting in even higher credit prices and increased profits for the banks.

Keywords: equity regulation; oligopoly; capacity constraint (search for similar items in EconPapers)
JEL-codes: G21 K23 L13 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2010-05
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-com and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Strategic Effects of Regulatory Capital Requirements in Imperfect Banking Competition (2013)
Journal Article: Strategic Effects of Regulatory Capital Requirements in Imperfect Banking Competition (2013)
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