Le paradoxe du contrôle dans les systèmes bancaires: homogénéité des contraintes prudentielles, duration commune et corrélation des ajustements de bilan

The Control Paradox in Banking Systems: Homogeneity of Prudential Constraints, Common Duration and Correlation of Balance-Sheet Adjustments

Alexis Chevalier

MPRA Paper from University Library of Munich, Germany

Abstract: Complex systems exhibit a counter-intuitive property: excessive control of ordinary disturbances and homogenisation of constraints tend to concentrate fragility and amplify extreme events. This paper applies this insight to banking systems. It argues that greater similarity in binding prudential constraints across banks, combined with similar duration gaps (Macaulay or effective), is associated with higher conditional correlation of balance-sheet adjustments under stress—particularly interest-rate shocks. The hypothesis is motivated by analogies from wildfire suppression and antibiotic resistance, by the 2008 Fortis resolution, and by the 2023 US regional banking stress (SVB, Signature, First Republic). The paper provides a micro-foundation using constrained optimisation (Lagrangian and Kuhn-Tucker conditions) that includes balance-sheet equilibrium, prudential constraints and a duration-gap condition. When constraints and duration exposures are common across banks, the bordered Hessians become similar, producing correlated reactions to a common shock. An index of systemic correlation is proposed. The analysis then contrasts this regime with one in which banks can choose their own coverage ratios, issue distinct deposit instruments, and set their own interest rates, thereby constructing more independent duration profiles and reducing conditional correlation. The contribution is conceptual: it isolates the channel running from similarity of binding constraints and duration gaps to correlated balance-sheet reactions.

Keywords: systemic risk; banking regulation; prudential constraints; duration gap; balance-sheet correlation; complex systems; robust-yet-fragile; constrained optimisation; fire sales; antifragility (search for similar items in EconPapers)
JEL-codes: C61 D85 E58 G01 G21 G28 (search for similar items in EconPapers)
Date: 2026-08-15
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