The Impacts of Strengthening Regulatory Surveillance on Bank Behavior: A Dynamic Analysis from Incomplete to Complete Enforcement of Capital Regulation in Microprudential Policy

Kiyotaka Nakashima and Toshiaki Ogawa

MPRA Paper from University Library of Munich, Germany

Abstract: This study examines the impact of strengthening bank capital supervision on bank behavior in the incomplete and complete enforcement of regulations. In a dynamic model of banks facing idiosyncratic shocks, banks accumulate regulatory capital and decrease charter value and lending in the short run, while in the long run, the banking system achieves stability. To test the short-run implications, we utilize the introduction of the prompt corrective action program in Japan as a natural experiment. Using some empirical specifications with bank- and loan-level data, we find empirical evidence consistent with the theoretical predictions.

Keywords: regulatory surveillance; incomplete enforcement; heterogeneous bank model; prompt corrective action; bank capital ratio; credit crunch (search for similar items in EconPapers)
JEL-codes: G00 G21 G28 (search for similar items in EconPapers)
Date: 2020-04-29
New Economics Papers: this item is included in nep-ban and nep-cba
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/99938/1/MPRA_paper_99938.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:99938

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().