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Bank Regulation: One Size Does Not Fit All

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  • David Grossmann
  • Peter Scholz

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. [1], 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.JEL classification numbers: G21, G28, G32Keywords: Bank Business Models, Bank Capital Requirements, Cost of Capital, Leverage Ratio, Regulation, SREP

Suggested Citation

  • David Grossmann & Peter Scholz, 2017. "Bank Regulation: One Size Does Not Fit All," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 7(5), pages 1-1.
    • Handle: RePEc:spt:apfiba:v:7:y:2017:i:5:f:7_5_1
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    Cited by:

    1. David Grossmann & Peter Scholz, 2019. "The golden rule of banking: funding cost risks of bank business models," Journal of Banking Regulation, Palgrave Macmillan, vol. 20(2), pages 174-196, June.

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    More about this item

    Keywords

    bank business models; bank capital requirements; cost of capital; leverage ratio; regulation; srep;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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