IDEAS home Printed from https://ideas.repec.org/a/eee/jfinec/v170y2025ics0304405x25000881.html
   My bibliography  Save this article

Banks as regulated traders

Author

Listed:
  • Falato, Antonio
  • Iercosan, Diana
  • Zikes, Filip

Abstract

Banks use trading as a vehicle to take risk. Using high-frequency regulatory data, we estimate the sensitivity of weekly bank trading profits to aggregate equity, fixed-income, credit, currency, and commodity risk factors. Our estimates imply that U.S. banks had large trading exposures to equity market risk before the Volcker Rule, which they curtailed afterwards. Credit and currency risk exposures were smaller. The results hold up in a quasi-natural experiment that exploits the phased-in introduction of reporting requirements for identification. Total trading-book risk was also curtailed afterwards with material financial stability implications and no evidence of migration to other bank activities.

Suggested Citation

  • Falato, Antonio & Iercosan, Diana & Zikes, Filip, 2025. "Banks as regulated traders," Journal of Financial Economics, Elsevier, vol. 170(C).
    • Handle: RePEc:eee:jfinec:v:170:y:2025:i:c:s0304405x25000881
    DOI: 10.1016/j.jfineco.2025.104080
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0304405X25000881
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jfineco.2025.104080?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Financial regulation; Bank risk taking;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jfinec:v:170:y:2025:i:c:s0304405x25000881. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505576 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.