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Regulatory oversight and bank risk

Dimitris K. Chronopoulos, John Wilson and Muhammed H. Yilmaz

Journal of Financial Stability, 2023, vol. 64, issue C

Abstract: We investigate how a change in regulatory oversight affects bank risk, using the passage of the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 as a setting. Using a sample of bank holding companies (BHCs) covering the period 2015Q1 through 2020Q1, we find that risk increases for large BHCs affected by a change in regulatory oversight. In addition to increasing bank level risk, affected BHCs increase their respective contribution to the systemic risk. These BHCs also experience higher profitability, increased market valuation and reduced compliance costs.

Keywords: Bank Regulation; Bank Risk; Difference-in-Differences; Dodd-Frank Act; Economic Growth; Regulatory Relief; And Consumer Protection Act (search for similar items in EconPapers)
JEL-codes: G21 G28 G32 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1016/j.jfs.2023.101105

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