Window dressing of regulatory metrics: Evidence from repo markets

Claudio Bassi, Markus Behn, Michael Grill and Martin Waibel

Journal of Financial Intermediation, 2024, vol. 58, issue C

Abstract: This paper investigates both the magnitude and the drivers of bank window dressing behavior in euro-denominated repo markets. Using a confidential transaction-level data set, our analysis illustrates that banks engineer an economically sizeable contraction in their repo transactions around regulatory reporting dates. We establish a causal link between these reductions and banks’ incentives to window dress and document the role of the leverage ratio and the G-SIB framework as the most relevant drivers of window dressing behavior. Our findings suggest that regulatory action is warranted to limit banks’ ability to window dress.

Keywords: Banking regulation; Window dressing; Repo markets; Leverage ratio; G-SIBs (search for similar items in EconPapers)
JEL-codes: C23 G14 G18 G21 G28 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinin:v:58:y:2024:i:c:s1042957324000147

DOI: 10.1016/j.jfi.2024.101086

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