Regulatory Competition in Banking: A General Equilibrium Approach

45 Pages Posted: 20 Mar 2018

See all articles by Hans Gersbach

Hans Gersbach

ETH Zurich - CER-ETH -Center of Economic Research; IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Hans H. Haller

Virginia Polytechnic Institute & State University - Department of Economics

Stylianos Papageorgiou

ETH Zürich; Centre for Economic Policy Research (CEPR)

Date Written: March 2018

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.

Keywords: bank levy, bank resolution, Capital requirements, General Equilibrium, Regulatory competition

Suggested Citation

Gersbach, Hans and Haller, Hans H. and Papageorgiou, Stylianos, Regulatory Competition in Banking: A General Equilibrium Approach (March 2018). CEPR Discussion Paper No. DP12791, Available at SSRN: https://ssrn.com/abstract=3143441

Hans Gersbach (Contact Author)

ETH Zurich - CER-ETH -Center of Economic Research ( email )

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IZA Institute of Labor Economics

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CESifo (Center for Economic Studies and Ifo Institute)

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Centre for Economic Policy Research (CEPR)

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Hans H. Haller

Virginia Polytechnic Institute & State University - Department of Economics ( email )

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540-231-7591 (Phone)
540-231-5097 (Fax)

Stylianos Papageorgiou

ETH Zürich ( email )

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ZUE F7
Zürich, 8092
Switzerland

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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