Bank Leverage, Financial Fragility and Prudential Regulation
Andre Cartapanis and
No 2014-12, GREDEG Working Papers from Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France
We analyse the determinants of bank balance-sheets and leverage-ratio dynamics, and their role in increasing financial fragility. Our results are twofold. First, we show that there is a value of bank leverage that minimises financial fragility. Second, we show that this value depends on the overall business climate, the expected value of the collateral provided by firms, and the risk-free interest rate. These results lead us to advocate for the establishment of an adjustable leverage ratio depending on economic conditions, rather than the fixed ratio provided for under the new Basel III regulation.
Keywords: Bank leverage; Leverage ratio; Financial instability; Prudential regulation (search for similar items in EconPapers)
JEL-codes: E44 G28 (search for similar items in EconPapers)
Pages: 37 pages
New Economics Papers: this item is included in nep-ban, nep-cba, nep-cfn, nep-mac and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed
Downloads: (external link)
http://www.gredeg.cnrs.fr/working-papers/GREDEG-WP-2014-12.pdf First version, 2014 (application/pdf)
Working Paper: Bank leverage, financial fragility and prudential regulation (2013)
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:gre:wpaper:2014-12
Access Statistics for this paper
More papers in GREDEG Working Papers from Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France Contact information at EDIRC.
Bibliographic data for series maintained by Patrice Bougette ().