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What’s Different about Bank Holding Companies?

Ralph Chami (), Thomas F. Cosimano (), Jun Ma () and Celine Rochon ()
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Thomas F. Cosimano: Department of Finance, Mendoza College of Business, University of Notre Dame, Notre Dame, IN 46556, USA
Jun Ma: Department of Economics, Northeastern University, Boston, MA 02115, USA
Celine Rochon: Institute for Capacity Development, International Monetary Fund, 700 19th Street NW, Washington, DC 20431, USA

JRFM, 2022, vol. 15, issue 5, 1-32

Abstract: We develop a dynamic model of a BHC that encompasses both a trading desk and a loan desk, and explore the role of risk attitude and overleveraging by the trading desk. We trace the impact of monetary policy and market innovations on bank behavior in the presence of Basel III type regulations. We show that the value of the BHC is enhanced by operating both desks. We explore alternative regulatory remedies to ongoing efforts to ring-fence the proprietary trading business, and show that regulations that target bank governance can mitigate possible rogue trading and the overleveraging problem.

Keywords: bank holding company; term structure; financial markets; banking; Basel III; bank capital; financial stability; monetary policy; macro prudential; ring-fencing (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2022
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Working Paper: What’s Different about Bank Holding Companies? (2017) Downloads
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