The Impact of Capital Regulation on Bank Capital and Risk Decision. Evidence for European Global Systemically Important Banks
Clements Adeyinka Akinsoyinu ()
International Journal of Academic Research in Accounting, Finance and Management Sciences, 2015, vol. 5, issue 3, 167-177
Large banks were largely blamed for the recent financial crisis, due to their roles in the propagation of the crisis. Partly due to the unprecedented amount of public funds disbursed to rescue the fail banks to avert the total breakdown of the global financial system and the resultant moral hazard of their bailout. Policymakers and regulators have significantly increased bank regulations after the crisis to rein-in some of the “excesses” of the banks that cause to the financial crisis. Particularly, Basel III capital regulation came into existence largely to strengthening the capital framework for banks and increases the loss absorbency for the so-called too big to fail banks. This study investigates the impact of capital regulation on the capital and risk portfolio behaviour of European large and complex banks during the period 2009–2014. By using a modified version of the structural equation model developed by Shrieves and Dahl (1992) to estimate the effect of capital regulation on banks’ capital and risk portfolios decisions. The findings of our model estimation indicate that regulation has a significant impact on changes in bank capital. We, however, do not find any significant evidence of the impact of regulation on bank risk portfolio decisions. Model estimation results also show that there is a significant negative relationship between changes in bank capital level and changes in risk portfolio level and vice versa.
Keywords: Capital requirements; bank regulation; bank capital; risk portfolio; regulatory pressure; capital ratio and global systemically important bank (search for similar items in EconPapers)
JEL-codes: M41 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Downloads: (external link)
http://hrmars.com/hrmars_papers/Article_19_The_Imp ... _on_Bank_Capital.pdf (application/pdf)
http://hrmars.com/hrmars_papers/Article_19_The_Imp ... _on_Bank_Capital.pdf (text/html)
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:hur:ijaraf:v:5:y:2015:i:3:p:167-177
Access Statistics for this article
More articles in International Journal of Academic Research in Accounting, Finance and Management Sciences from Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences
Bibliographic data for series maintained by Hassan Danial Aslam ().