We show that banks' risk exposure in one asset category affects how they report regulatory risk weights for another … asset category. Specifically, banks report lower credit risk weights for their loan portfolio when they face higher risk … constraints. Our results suggest the existence of incentive spillovers across different risk categories. We relate this behavior …

regulation hypothesis and Porter Hypothesis. …

in macroprudential capital regulation. Our findings suggest a dichotomy between country groups. In peripheral countries … after the innovation might pose a threat to financial stability to the extent that sovereign risk increases. By contrast, in … core countries, the cyclically adjusted primary balance ratio barely reacts to a sudden tightening in capital regulation. …

Uncertainty in election outcomes generates politically induced regulatory risk. For monopoly regulation, political … parties' risk attitudes towards such risk depend on a fluctuation effect that hurts both parties and an output …-expansion effect that benefits at least one party. Irrespective of the parties' risk attitudes, political parties have incentives to …

portfolio, one for market risk and one for credit risk. Similar approaches are common in banks’ internal models for economic … capital. Although it is known that joint market and credit risk of certain investments can be larger than the sum of risks … holdings or CDS portfolios – are also affected. There are realistic conditions under which credit risk (represented by ratings …