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Regulatory oversight and bank risk

Author

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  • Chronopoulos, Dimitris K.
  • Wilson, John O.S.
  • Yilmaz, Muhammed H.

Abstract

We investigate how a change in regulatory oversight affects bank risk, using the passage of the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 as a setting. Using a sample of bank holding companies (BHCs) covering the period 2015Q1 through 2020Q1, we find that risk increases for large BHCs affected by a change in regulatory oversight. In addition to increasing bank level risk, affected BHCs increase their respective contribution to the systemic risk. These BHCs also experience higher profitability, increased market valuation and reduced compliance costs.

Suggested Citation

  • Chronopoulos, Dimitris K. & Wilson, John O.S. & Yilmaz, Muhammed H., 2023. "Regulatory oversight and bank risk," Journal of Financial Stability, Elsevier, vol. 64(C).
    • Handle: RePEc:eee:finsta:v:64:y:2023:i:c:s1572308923000050
    DOI: 10.1016/j.jfs.2023.101105
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    More about this item

    Keywords

    Bank Regulation; Bank Risk; Difference-in-Differences; Dodd-Frank Act; Economic Growth; Regulatory Relief; And Consumer Protection Act;
    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
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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