Banking Competition, Risk and Regulation
Wilko Bolt () and
Scandinavian Journal of Economics, 2004, vol. 106, issue 4, 783-804
In a dynamic framework, commercial banks compete for customers by setting acceptance criteria for granting loans, while taking into account regulatory requirements. By easing its acceptance criteria a bank faces a trade-off between attracting more demand for loans, thus making higher per-period profits, and deterioration in the quality of its loan portfolio, thus tolerating a higher risk of failure. Our main results state that more stringent capital adequacy requirements lead banks to set stricter acceptance criteria, and that increased competition in the banking industry leads to riskier bank behaviour. It is shown that risk-adjusted regulation is effective. In an extension of our basic model, we show that it may be beneficial for a bank to hold more equity than prescribed by the regulator, even though issuing equity is more expensive than attracting deposits. Copyright The editors of the "Scandinavian Journal of Economics", 2004 .
References: Add references at CitEc
Citations View citations in EconPapers (22) Track citations by RSS feed
Downloads: (external link)
http://www.blackwell-synergy.com/servlet/useragent ... &year=2004&part=null link to full text (text/html)
Access to full text is restricted to subscribers.
Working Paper: Banking Competition, Risk, and Regulation (2004)
Working Paper: Banking competition, risk and regulation (2001)
Working Paper: Banking competition, risk, and regulation (2001)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bla:scandj:v:106:y:2004:i:4:p:783-804
Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0347-0520
Access Statistics for this article
Scandinavian Journal of Economics is currently edited by Richard Friberg, Matti Liski and Kjetil Storesletten
More articles in Scandinavian Journal of Economics from Wiley Blackwell
Series data maintained by Wiley-Blackwell Digital Licensing ().