Bank regulation when both deposit rate control and capital requirements are socially costly

Risultato della ricerca: Contributo in rivistaArticolo in rivistapeer review

1 Citazioni (Scopus)

Abstract

The bank regulation reforms in the 1980s and 1990s saw deposit rate ceilings being replaced by minimum capital requirements. However, there seems to be no theoretical studies supporting these reforms; either the two instruments are considered for all practical purposes equivalent, or the conclusion is in favor of deposit regulation. In our model there is a real tradeoff between the two: capital regulation is costly because the opportunity costs of capital is higher than the return from normal banking activities while deposit rate ceilings may result in an inefficiently high number of banks. We show that, depending on the opportunity costs of banking capital and on the severity of the moral hazard problem they seek to address, each of the two regulatory instruments may welfare dominate the other.
Lingua originaleEnglish
pagine (da-a)139-178
Numero di pagine40
RivistaInternational Journal of Economic Theory
DOI
Stato di pubblicazionePubblicato - 2018

Keywords

  • Salop model
  • banking regulation
  • capital requirement
  • deposit rate control
  • moral hazard

Fingerprint

Entra nei temi di ricerca di 'Bank regulation when both deposit rate control and capital requirements are socially costly'. Insieme formano una fingerprint unica.

Cita questo