We assess the influence of competition and capital regulation on the stability of the banking system. We particularly … ask two questions: i) how does capital regulation affect (endogenous) entry; and ii) how do (exogenous) changes in the … competitive environment affect bank monitoring choices and the effectiveness of capital regulation? Our approach deviates from the …

regulation, banking supervisors should now focus on the externalities that caused the amplification of the shock and use that …

system. Whereas the traditional view on regulation focuses on capital as a buffer against exogenous risks, our approach … boundary problem in entity-based financial regulation and provides a motivation for substantially lower levels of leverage …