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This paper examines bank portfolio management under banking regulation and asymmetric information about borrower types … and screening by banks and imperfect competition in the credit market. A bank tries to maximize expected profits subject … to a portfolio variance constraint. The analysis yields the following results: For a monopoly bank, the incentive …
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European supervisors aggressively requested more capital at large banks. That may cut credit to the economy. We confirm that especially larger banks cut loans while less-significant banks partly offset that credit drop. Moreover, we identify nasty spillovers from that interaction. Specifically,...
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