Abstract

http://ssrn.com/abstract=2467761
 


 



Macroprudential Bank Capital Regulation in a Competitive Financial System


Milton Harris


University of Chicago - Finance

Christian C. Opp


University of Pennsylvania - The Wharton School

Marcus M. Opp


University of California, Berkeley - Finance Group

October 9, 2014


Abstract:     
We propose a tractable general equilibrium framework to analyze the effectiveness of bank capital regulations when banks face competition from public markets. Our analysis shows that increased competition can not only render previously optimal bank capital regulations ineffective but also imply that, over some ranges, increases in capital requirements cause more banks to engage in value-destroying risk-shifting. Our model generates a set of novel implications that highlight the dependencies between optimal bank capital regulation and the comparative advantages of various players in the financial system.

Number of Pages in PDF File: 44

Keywords: capital requirements, macroprudential regulation, banks, competition, public capital markets

JEL Classification: G21, G28

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Date posted: July 19, 2014 ; Last revised: October 10, 2014

Suggested Citation

Harris, Milton and Opp, Christian C. and Opp, Marcus M., Macroprudential Bank Capital Regulation in a Competitive Financial System (October 9, 2014). Available at SSRN: http://ssrn.com/abstract=2467761 or http://dx.doi.org/10.2139/ssrn.2467761

Contact Information

Milton Harris
University of Chicago - Finance ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
(773) 702-2549 (Phone)
(773) 753-8310 (Fax)
HOME PAGE: http://faculty.chicagobooth.edu/milton.harris/

Chicago Booth School of Business Logo

Christian C. Opp
University of Pennsylvania - The Wharton School ( email )
3620 Locust Walk
2428 SH-DH
Philadelphia, PA 19104
United States
215-573-3186 (Phone)
Marcus M. Opp (Contact Author)
University of California, Berkeley - Finance Group ( email )
Haas School of Business
545 Student Services Building
Berkeley, CA 94720
United States
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