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What’s Different about Bank Holding Companies?

Author

Listed:
  • Ralph Chami

    (Institute for Capacity Development, International Monetary Fund, 700 19th Street NW, Washington, DC 20431, USA)

  • Thomas F. Cosimano

    (Department of Finance, Mendoza College of Business, University of Notre Dame, Notre Dame, IN 46556, USA)

  • Jun Ma

    (Department of Economics, Northeastern University, Boston, MA 02115, USA)

  • Celine Rochon

    (Institute for Capacity Development, International Monetary Fund, 700 19th Street NW, Washington, DC 20431, USA)

Abstract

We develop a dynamic model of a BHC that encompasses both a trading desk and a loan desk, and explore the role of risk attitude and overleveraging by the trading desk. We trace the impact of monetary policy and market innovations on bank behavior in the presence of Basel III type regulations. We show that the value of the BHC is enhanced by operating both desks. We explore alternative regulatory remedies to ongoing efforts to ring-fence the proprietary trading business, and show that regulations that target bank governance can mitigate possible rogue trading and the overleveraging problem.

Suggested Citation

  • Ralph Chami & Thomas F. Cosimano & Jun Ma & Celine Rochon, 2022. "What’s Different about Bank Holding Companies?," JRFM, MDPI, vol. 15(5), pages 1-32, April.
    • Handle: RePEc:gam:jjrfmx:v:15:y:2022:i:5:p:206-:d:805693
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    Cited by:

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    3. Cao, Ting & Cook, Wade D. & Kristal, M. Murat, 2022. "Has the technological investment been worth it? Assessing the aggregate efficiency of non-homogeneous bank holding companies in the digital age," Technological Forecasting and Social Change, Elsevier, vol. 178(C).
    4. Behn, Markus & Daminato, Claudio & Salleo, Carmelo, 2019. "A dynamic model of bank behaviour under multiple regulatory constraints," Working Paper Series 2233, European Central Bank.
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    6. Kudret Topyan & Chia-Jane Wang & Natalia Boliari & Carlos Elias, 2024. "Credit Risk Management and US Bank-Holding Companies: An Empirical Investigation," JRFM, MDPI, vol. 17(2), pages 1-11, January.

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