IDEAS home Printed from https://ideas.repec.org/a/pal/jbkreg/v16y2015i1p64-71.html
   My bibliography  Save this article

Regulation and contagion of banks

Author

Listed:
  • Yvan Lengwiler
  • Dietmar Maringer

Abstract

Bank regulation is supposed to reduce the probability of bank failure and, if a failure occurs, to contain the damage so that system-wide problems are unlikely. The current regulatory framework, known as Basel II, is based, among other things, on risk-adjusted capital requirements. This framework has failed in the recent global financial crisis. Some believe that one of the culprits is the exclusion of so-called shadow banks (for example, hedge funds and investment banks) from regulation. We find little support for this assumption in our simulations. To the contrary, our simulations reveal that extending the same regulation to more entities is likely to produce very synchronous behaviour and thus exacerbate contagion and market crashes. On the other hand, the new size-adjusted regulation (the so-called leverage ratio) that has been proposed in Basel III appears to be more robust.

Suggested Citation

  • Yvan Lengwiler & Dietmar Maringer, 2015. "Regulation and contagion of banks," Journal of Banking Regulation, Palgrave Macmillan, vol. 16(1), pages 64-71, January.
    • Handle: RePEc:pal:jbkreg:v:16:y:2015:i:1:p:64-71
    as

    Download full text from publisher

    File URL: http://www.palgrave-journals.com/jbr/journal/v16/n1/pdf/jbr201320a.pdf
    File Function: Link to full text PDF
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: http://www.palgrave-journals.com/jbr/journal/v16/n1/full/jbr201320a.html
    File Function: Link to full text HTML
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

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

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Huynh, Toan Luu Duc & Nasir, Muhammad Ali & Nguyen, Sang Phu & Duong, Duy, 2020. "An assessment of contagion risks in the banking system using non-parametric and Copula approaches," Economic Analysis and Policy, Elsevier, vol. 65(C), pages 105-116.
    2. Retselisitsoe I. Thamae & Nicholas M. Odhiambo, 2022. "The impact of bank regulation on bank lending: a review of international literature," Journal of Banking Regulation, Palgrave Macmillan, vol. 23(4), pages 405-418, December.
    3. Douglas da Rosa München & Herbert Kimura, 2020. "Regulatory Banking Leverage: what do you know?," Working Papers Series 540, Central Bank of Brazil, Research Department.

    More about this item

    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:pal:jbkreg:v:16:y:2015:i:1:p:64-71. 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    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.