Citation

Discussion Paper Details

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Title: Regulatory Competition in Banking: A General Equilibrium Approach

Author(s): Hans Gersbach, Hans Haller and Stylianos Papageorgiou

Publication Date: March 2018

Keyword(s): bank levy, bank resolution, Capital requirements, General Equilibrium and Regulatory competition

Programme Area(s): Financial Economics and Industrial Organization

Abstract: We study competition between governments with regard to capital requirements, bank levies and resolution regimes in a general equilibrium setting. In a two-country model, households can invest both domestically and abroad, with banks acting as intermediaries between households and risky technologies. When competing governments set banking regulation, the mechanism at work is driven by the trade-off between accentuating benefits over costs stemming from banking activities, on the one hand, and enhancing banks' competitiveness, on the other hand. Whether or not regulatory competition yields the efficient allocation of resources and risks crucially depends on whether governments compete with one, two or three policy tools.

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Bibliographic Reference

Gersbach, H, Haller, H and Papageorgiou, S. 2018. 'Regulatory Competition in Banking: A General Equilibrium Approach'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12791