The effects of national discretions on banks
AbstractThe EU's transposition of Basel II into European law has been done through the Capital Requirements Directive (CRD). Although the Directive establishes, in general, uniform rules to set capital requirements across European countries, there are some areas where the Directive allows some heterogeneity. In particular, countries are asked to choose among different possibilities when transposing the Directive, which are called national discretions (ND). The main objective of our research is to use such observed heterogeneity to gather empirical evidence on the effects on European banks of more or less stringency and more or less risk sensitivity in capital requirements. Following the approach in Barth et al. (2004, 2006, 2008) we build index numbers for groups of national discretions and applying Altunbas et al. (2007) approach, we provide evidence on their effect on banks' risk, capital, efficiency and cost. We show that more stringency and more risk sensitivity in regulation not always result in a trade off between efficiency and solvency: the impact depends on the area of national discretion on which such characteristics apply.
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Bibliographic InfoPaper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 1029.
Length: 43 pages
Date of creation: Sep 2010
Date of revision:
Prudential regulation; capital requirements; bank capital; risk; efficiency;
Find related papers by JEL classification:
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-09-25 (All new papers)
- NEP-BAN-2010-09-25 (Banking)
- NEP-EEC-2010-09-25 (European Economics)
- NEP-EUR-2010-09-25 (Microeconomic European Issues)
- NEP-MAC-2010-09-25 (Macroeconomics)
- NEP-REG-2010-09-25 (Regulation)
- NEP-RMG-2010-09-25 (Risk Management)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fulbert Tchana Tchana, 2009.
"The Empirics of Banking Regulation,"
128, Economic Research Southern Africa.
- Javier Andrés & Óscar Arce & Carlos Thomas, 2013.
"Banking Competition, Collateral Constraints, and Optimal Monetary Policy,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 45(s2), pages 87-125, December.
- Javier Andrés & Óscar Arce & Carlos Thomas, 2010. "Banking competition, collateral constraints and optimal monetary policy," Banco de Espaï¿½a Working Papers 1001, Banco de Espa�a.
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