Limited liability and asymmetric information between an investment bank and its lenders provide an incentive for a bank to undercapitalise and finance overly risky business projects. To counter this market failure, national governments have imposed solvency constraints on banks. However, these...

Several countries have recently introduced national capital standards exceeding the internationally coordinated Basel III rules, thus suggesting a 'race to the top' in capital standards. We study regulatory competition when banks are heterogeneous and give loans to firms that produce output in...

Most European economies will experience significant demographic changes in the decades ahead. Due to low birth rates, populations are shrinking and ageing at the same time. This paper explores the impact of demographic change on the banking industry. A unique data set, which contains detailed...

We provide evidence that German savings banks - where local politicians are by law involved in their management - systematically adjust lending policies in response to local electoral cycles. The different timing of county elections across states and the existence of a control group of...

We develop a simple model of banking regulation with two policy instruments: minimum capital requirements and supervision of domestic banks. The regulator faces a trade-off: high capital requirements cause a drop in the banks'; profitability, while strict supervision reduces the scope of...

We study the efficiency of banking regulation under financial integration. Banks freely choose the jurisdiction where to locate their activities and have private information about their efficiency level. Regulators non-cooperatively offer any regulatory contract that satisfies information and...

This paper focuses on the consequences of cross-border banking and entry of multi-national banks (MNBs) for banking supervision and regulation. When a MNB expands internationally with subsidiaries, the MNB operates under the legislation of several countries - both the home country and the host...

The emergence of so-called "decentralised finance" (DeFi) and a shadow financial system of cryptocurrency exchanges and stablecoin issuers raises the challenge of how to apply technology-neutral regulation so that similar risks are subject to the same rules. This paper makes the case for...

We examine the fiscal footprint of macroprudential policy in euro area countries arising through the bond market channel (Reis, 2021). Using local projections, we estimate impulse responses of the fiscal balance to an unexpected tightening in macroprudential capital regulation. Our findings...