Minimum capital requirement regulation forces banks to refund a substantial amount of their investments with equity. This creates a buffer against losses, but also in- creases the cost of funding. If higher refunding costs translate into higher loan interest rates, then borrowers are likely to...

Using a simple symmetric principal-agent model of two banks, this paper studies the effects of both bailouts and bonus taxes on risk taking and managerial compensation. In contrast to existing literature, we assume financial institutions to be systemic only on a collective basis, implying...

Objectives-based legislation - or laws which focus on achieving particular and concrete outcomes - has become a new and important tool that financial sector regulators use to tackle large and varied financial system risks. Yet, objectives-based legislation - and the frequent principles-based...

Do financial regulation advisors help their clients become more profitable? In this paper, we present a model where financial service firms may add to their own compliance teams or hire outside compliance advisors. We derive the conditions under which a financial services firm will want to hire...

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...

The OECD Competition Committee the role of competition in the regulation of banks in February 1998. This document includes an executive summary and submissions from Australia, Austria, Canada, the Czech Republic, Denmark, the European Commission, Finland, France, Germany, Greece, Hungary, Italy,...

Insurance intermediaries have a key role in the efficient functioning of insurance markets, and minimising information asymmetries and risk of adverse selection is an important consideration. Intermediaries can analyse the needs of insurance consumers, and advise on appropriate solutions and...

The Single Supervisory Mechanism was introduced to eliminate the common-pool problem and limit uncontrolled lending by national central banks (NCBs). We analyze its effectiveness. Second, we model how, by forbearing and providing refinancing credit, NCBs avoid domestic resolution costs and,...