30
MAI 2016

14:15 - 13:45
IWH Research Seminar

Bank Capital Regulation with Unregulated Competitors

We analyze optimal capital regulation of imperfectly competitive banks that are confronted with competition from non-regulated banks. We characterize banks as having access to deposit insurance and underly banking regulation in exchange.

Wer
Eva Schliephake  (Rheinische Friedrich-Wilhelms-Universität Bonn)
Wo
IWH conference room
Eva Schliephake

Zur Person

Eva Schliephake is an Assistant Professor at the University of Bonn, Institute for Financial Economics and Statistics.

We analyze optimal capital regulation of imperfectly competitive banks that are confronted with competition from non-regulated banks. We characterize banks as having access to deposit insurance and underly banking regulation in exchange. Non-regulated banks also perform lending activities but cannot fund themselves with insured deposits. We show that tightening bank regulation reduces the social cost of bank defaults but can also result in lower bank lending. A competitive non regulated banking sector can reduce the negative impact of less bank lending and, thereby, can allow for stricter bank regulation. We show how in regulated banking sectors with high market power, an increase in competition from non-regulated banks results in tighter optimal bank regulation and higher welfare. However, in regulated banking sectors with lower market power, an increase in competition from non-regulated banks may lead to looser capital regulation and lower welfare.

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