Strategic Effects of Regulatory Capital Requirements in Imperfect Banking Competition
This paper analyses the competitive effects of capital requirement regulation on an oligopolistic credit market. In the first stage, banks choose the structure of refinancing their assets, thereby making an imperfect commitment to a loan capacity as a function of the chosen degree of capitalization and the regulatory capital requirement. In the second stage, loan price competition takes place. It is shown that a capital requirement regulation may not only decrease the supply of credit through an increased marginal cost effect but can have an additional collusive enhancing effect resulting in even higher credit prices and increased profits for the banks.
|Date of creation:||May 2010|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (0391) 67-18 584
Fax: (0391) 67-12 120
Web page: http://www.ww.uni-magdeburg.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- João A. C. Santos, 2000. "Bank capital regulation in contemporary banking theory: a review of the literature," BIS Working Papers 90, Bank for International Settlements.
- David VanHoose, 2008. "Bank Capital Regulation, Economic Stability, and Monetary Policy: What Does the Academic Literature Tell Us?," Atlantic Economic Journal, International Atlantic Economic Society, vol. 36(1), pages 1-14, March.
- Furlong, Frederick T. & Keeley, Michael C., 1989. "Capital regulation and bank risk-taking: A note," Journal of Banking & Finance, Elsevier, vol. 13(6), pages 883-891, December.
- VanHoose, David, 2007. "Theories of bank behavior under capital regulation," Journal of Banking & Finance, Elsevier, vol. 31(12), pages 3680-3697, December.
- Wagner, W.B., 2007.
"Loan Market Competition and Bank Risk-Taking,"
2007-010, Tilburg University, Tilburg Law and Economic Center.
- Boccard, Nicolas & Wauthy, Xavier, 2000.
"Bertrand competition and Cournot outcomes: further results,"
Elsevier, vol. 68(3), pages 279-285, September.
- BOCCARD , Nicolas & WAUTHY, Xavier, . "Bertrand competition and Cournot outcomes: futher results," CORE Discussion Papers RP -1474, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Maggi, Giovanni, 1996. "Strategic Trade Policies with Endogenous Mode of Competition," American Economic Review, American Economic Association, vol. 86(1), pages 237-58, March.
- Franklin Allen & Douglas Gale, 2004.
"Competition and financial stability,"
Federal Reserve Bank of Cleveland, pages 453-486.
- Keeley, Michael C, 1990. "Deposit Insurance, Risk, and Market Power in Banking," American Economic Review, American Economic Association, vol. 80(5), pages 1183-1200, December.
- BOCCARD, Nicolas & WAUTHY, Xavier, 1999. "Relaxing Bertrand competition : capacity commitment beats quality differentiation," CORE Discussion Papers 1999056, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
When requesting a correction, please mention this item's handle: RePEc:mag:wpaper:100012. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guido Henkel)
If references are entirely missing, you can add them using this form.