Bank Regulation: One Size Does Not Fit All

Journal of Applied Finance & Banking, Vol. 7, No. 5, 2017, pp. 1-27

Posted: 20 Jan 2017 Last revised: 15 Aug 2017

See all articles by David Großmann

David Großmann

Andrassy University Budapest, Students; HSBA Hamburg School of Business Administration, Students

Peter Scholz

Hamburg School of Business Administration

Date Written: February 9, 2017

Abstract

Bank business models show diverse risk characteristics, but these differences are not sufficiently considered in Pillar 1 of the regulatory framework. Even if the business model is analyzed within the European SREP, global Pillar 2 approaches differ and could lead to competitive disadvantages. Using the framework of Miles et al. (2012), we examine a dataset of 115 European banks, which is split into retail, wholesale, and trading banks. We show that shifts in funding structure affect business models differently. Consequently, a “one size” approach in Pillar 1 for the regulation of banks does not fit all.

Keywords: Bank Business Models, Bank Capital Requirements, Cost of Capital, Leverage Ratio, Regulation, SREP

JEL Classification: G21, G28, G32

Suggested Citation

Großmann, David and Scholz, Peter, Bank Regulation: One Size Does Not Fit All (February 9, 2017). Journal of Applied Finance & Banking, Vol. 7, No. 5, 2017, pp. 1-27, Available at SSRN: https://ssrn.com/abstract=2477809 or http://dx.doi.org/10.2139/ssrn.2477809

David Großmann (Contact Author)

Andrassy University Budapest, Students ( email )

Hungary

HSBA Hamburg School of Business Administration, Students ( email )

Germany

Peter Scholz

Hamburg School of Business Administration ( email )

Willy-Brandt-Str. 75
Hamburg, 20459
Germany
+4917684421336 (Phone)

HOME PAGE: http://think-finance.de

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