Regulation is often funded with fees paid by regulated firms, potentially creating incentive problems. We use this feature to study the incentives of regulators and their ability to affect firm behavior. Theoretically, we show that firms that pay higher fees may face more lenient regulation,...

Inadequate regulation of the financial system is widely thought to have contributed to the financial crisis. The purpose of the book is to articulate a framework within which financial regulation can be analysed in a coherent and comprehensive fashion. The book's approach is distinctive in...

The rest of this paper is set up as follows. In section 2 we provide a brief description of the ECB's comprehensive assessment of the European banking system. In section 3 we describe the data we are using and provide some descriptive statistics, particularly regarding the changes between the...

We analyze the effect of a U.S. subprime mortgage regulation on the availability of mortgagecredit. Due to all subprime mortgage originators being affected by the regulation studied,there is no natural control group. We use a pro t maximization assumption to construct acontrol group. We nd no...

We investigate systematic changes in banks' projected credit losses between the 2014 and 2016 EBA stress tests, employing methodology from Philippon et al. (2017). We find that projected credit losses were smoothed across the tests through systematic model adjustments. Those banks whose losses...

Effective financial regulation is clearly crucial to innovation and the future success of the financial services industry and, in specific, FinTech. There are also unprecedented opportunities for reforming regulation and also creating new businesses in the process. Examples include: using “big...

This joint ECB-DNB Occasional Paper aims to inform the ongoing discussions about an EU-level framework for operationalising macroprudential leverage limits for alternative investment funds (AIFs). It builds on, and extends, the analysis of an ECB-DNB special feature article published in the...

Regulators are largely problem solvers. They seek intended consequences. However, observation indicates that regulatory intentions and outcomes frequently do not coincide. If you will, there is a gap between the two; namely that of unintended consequences. Such consequences are the result of...

We propose a stress-testing framework to evaluate the sensitivity of banks' profitability to plausible but severe adverse macroeconomic shocks. Specifically, we test the resilience of French banks' profitability over the period 1993–2009. First, we identify the macroeconomic and financial...