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On Banking Regulation and Lobbying


  • Hans Gersbach

    () (ETH Zurich, Switzerland)

  • Stylianos Papageorgiou

    () (University of Cyprus, Cyprus)


We study the political economy of bank capital regulation from a positive and normative perspective. In a general equilibrium setting, capital requirements and lobbying contributions are determined as the outcome of bargaining between banks and politicians. We show that bankers and politicians agree on lobbying contributions and capital regulation that renders banks fragile, reducing efficiency and fairness. Consideration of all general equilibrium effects, or a bail-in provision and high capital regulation standards from international agreements eliminate lobbying incentives, yielding an efficient and fair allocation.

Suggested Citation

  • Hans Gersbach & Stylianos Papageorgiou, 2019. "On Banking Regulation and Lobbying," CER-ETH Economics working paper series 19/308, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  • Handle: RePEc:eth:wpswif:19-308

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    Banking regulation; lobbying; regulatory capture; capital requirements; bank resolution; risk-taking.;

    JEL classification:

    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • 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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