The Dark Side of Prudential Measures

Paulo Scalco, Benjamin Tabak and Anderson Mutter Teixeira ()
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Anderson Mutter Teixeira: FACE/UFG

No 78, Working papers - Textos para Discussao do Curso de Ciencias Economicas da UFG from Curso de Ciencias Economicas da Universidade Federal de Goias - FACE

Abstract: In the aftermath of the financial crisis of 2008 and 2009, there is a series of changes in the scenario of financial regulation. Globally, several macroprudential measures that seek to limit systemic risk are currently in use. We evaluated the e ect of these measures on the market power of banks in the Brazilian case, in which there was a process of great banking concentration that coexists with high bank spreads. Using an innovative methodology, we show that the e ect of macroprudential measures is to reduce bank competition by increasing the market power of banks. It is essential that financial regulators consider this adverse effect in the design of a financial regulation that not only aims at financial stability but also a more competitive banking system.

Keywords: Bank Regulation; Prudential Measures; Market Power; Lerner Index; Stochastic Frontier. (search for similar items in EconPapers)
Pages: 55 pages
Date: 2019-06
New Economics Papers: this item is included in nep-com, nep-fmk and nep-rmg
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https://files.cercomp.ufg.br/weby/up/118/o/TD_078.pdf First version, 2019 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:ufb:wpaper:078

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