TY - JOUR
T1 - Franchise Values, Regulatory Monitoring, and Capital Requirements in Optimal Bank Regulation
AU - Andersen, Thomas Barnebeck
AU - Harr, Thomas
N1 - JEL Classification: G2, L5
PY - 2008
Y1 - 2008
N2 - This paper demonstrates that financial deregulation is likely to make standard prudential regulatory instruments less effective in curbing excessive risk-taking incentives among banks. This has interesting implications for optimal bank regulation. When there is an increase in competition, the optimal capital requirement should increase, whereas regulatory auditing should decrease. In contrast, when there is an increase in gambling yields, auditing should always increase, whereas the optimal capital requirement may increase or decrease.
AB - This paper demonstrates that financial deregulation is likely to make standard prudential regulatory instruments less effective in curbing excessive risk-taking incentives among banks. This has interesting implications for optimal bank regulation. When there is an increase in competition, the optimal capital requirement should increase, whereas regulatory auditing should decrease. In contrast, when there is an increase in gambling yields, auditing should always increase, whereas the optimal capital requirement may increase or decrease.
KW - Faculty of Social Sciences
KW - imperfect Competition
U2 - 10.1177/097265270700700104
DO - 10.1177/097265270700700104
M3 - Journal article
SN - 0972-6527
VL - 7
SP - 81
EP - 101
JO - Journal of Emerging Market Finance
JF - Journal of Emerging Market Finance
IS - 1
ER -