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A Review of Empirical Research on the Design and Impact of Regulation in the Banking Sector

Author

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  • Hans Degryse

    (Department of Accountancy, Finance and Insurance, KU Leuven, 3000 Leuven, Belgium; and Centre for Economic Policy Research, EC1V 3PZ London, United Kingdom)

  • Sanja Jakovljević

    (Department of Accountancy, Finance and Insurance, KU Leuven, 3000 Leuven, Belgium)

  • Steven Ongena

    (Centre for Economic Policy Research, EC1V 3PZ London, United Kingdom; Department of Banking and Finance, University of Zürich, 8032 Zürich, Switzerland; and Swiss Finance Institute, CH-8006 Zürich, Switzerland)

Abstract

We review existing empirical research on the design and impact of regulation in the banking sector. The impact of each individual piece of regulation may inexorably depend on the set of regulations already in place, the characteristics of the banks involved (from their size or ownership structure to operational idiosyncrasies in terms of capitalization levels or risk-taking behavior), and the institutional development of the country where the regulation is introduced. This complexity is challenging for the econometrician, who relies either on single-country data to identify challenges for regulation or on cross-country data to assess the overall effects of regulation. It is also troubling for the policy maker, who has to optimally design regulation to avoid any unintended consequences, especially those that vary over the credit cycle such as the currently developing macroprudential frameworks.

Suggested Citation

  • Hans Degryse & Sanja Jakovljević & Steven Ongena, 2015. "A Review of Empirical Research on the Design and Impact of Regulation in the Banking Sector," Annual Review of Financial Economics, Annual Reviews, vol. 7(1), pages 423-443, December.
    • Handle: RePEc:anr:refeco:v:7:y:2015:p:423-443
    DOI: 10.1146/annurev-financial-111914-042024
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    1. Lskavyan, Vahe, 2020. "Banking crisis and bank supervisory accountability," Journal of Economics and Business, Elsevier, vol. 107(C).
    2. Le, Minh & Hoang, Viet-Ngu & Wilson, Clevo & Managi, Shunsuke, 2020. "Net stable funding ratio and profit efficiency of commercial banks in the US," Economic Analysis and Policy, Elsevier, vol. 67(C), pages 55-66.
    3. Bátiz-Zuk, Enrique & Lara-Sánchez, José Luis, 2022. "Measuring the evolution of competition and the impact of the financial reform in the Mexican banking sector, 2008–2019," Research in International Business and Finance, Elsevier, vol. 59(C).
    4. Carlo Alcaraz & Stijn Claessens & Gabriel Cuadra & David Marques-Ibanez & Horacio Sapriza, 2018. "Whatever it takes. What's the impact of a major nonconventional monetary policy intervention?," BIS Working Papers 749, Bank for International Settlements.
    5. Stijn Claessens & Andy Law & Teng Wang, 2018. "How do credit ratings affect bank lending under capital constraints?," BIS Working Papers 747, Bank for International Settlements.
    6. Berger, Allen N. & Boot, Arnoud W.A., 2024. "Financial intermediation services and competition analyses: Review and paths forward for improvement," Journal of Financial Intermediation, Elsevier, vol. 57(C).
    7. Merz, Julia & Overesch, Michael & Wamser, Georg, 2017. "The location of financial sector FDI: Tax and regulation policy," Journal of Banking & Finance, Elsevier, vol. 78(C), pages 14-26.
    8. Carlo Alcaraz & Stijn Claessens & Gabriel Cuadra & David Marques-Ibanez & Horacio Sapriza, 2025. "What is the Impact of a Major Unconventional Monetary Policy Intervention?," Working Paper 25-07, Federal Reserve Bank of Richmond.
    9. Hasan, Iftekhar & Hassan, Gazi & Kim, Suk-Joong & Wu, Eliza, 2021. "The real impact of ratings-based capital rules on the finance-growth nexus," International Review of Financial Analysis, Elsevier, vol. 73(C).
    10. Bank for International Settlements, 2016. "Literature review on integration of regulatory capital and liquidity instruments," BCBS Working Papers 30, Bank for International Settlements.
    11. Stijn Claessens, 2019. "Fragmentation in global financial markets: good or bad for financial stability?," BIS Working Papers 815, Bank for International Settlements.

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    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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