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Has Regulatory Capital Made Banks Safer? Skin in the Game vs Moral Hazard

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  • Ernest Dautovic

Abstract

The paper evaluates the impact of macroprudential capital regulation on bank capital, risk taking behaviour, and solvency. The identication relies on an exogenous policy change in bank-level capital requirements across systemically important banks in Europe. A one percentage point hike in capital requirements leads to anaverage CET1 capital level increase of 13 percent improving their loss absorption capacity.

Suggested Citation

  • Ernest Dautovic, 2019. "Has Regulatory Capital Made Banks Safer? Skin in the Game vs Moral Hazard," Cahiers de Recherches Economiques du Département d'économie 19.03, Université de Lausanne, Faculté des HEC, Département d’économie.
  • Handle: RePEc:lau:crdeep:19.03
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    1. van der Plaat, Mark & Spierdijk, Laura, 2020. "Recourse, asymmetric information, and credit risk over the business cycle," MPRA Paper 104718, University Library of Munich, Germany.

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    More about this item

    Keywords

    capital requirements; risk-taking; moral hazard; macroprudential policy;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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