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Contribution Details
| Type | Journal Article |
| Scope | Discipline-based scholarship |
| Title | Supranational Rules, National Discretion: Increasing versus Inflating Regulatory Bank Capital? |
| Organization Unit | |
| Authors |
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| Item Subtype | Original Work |
| Refereed | Yes |
| Status | Published in final form |
| Language |
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| Journal Title | Journal of Financial and Quantitative Analysis |
| Publisher | Cambridge University Press |
| Geographical Reach | international |
| ISSN | 0022-1090 |
| Volume | 59 |
| Number | 2 |
| Page Range | 830 - 862 |
| Date | 2024 |
| Abstract Text | We study how banks use "regulatory adjustments" to inflate their regulatory capital ratios and whether this depends on forbearance on the part of national authorities. Using the 2011 EBA capital exercise as a quasi-natural experiment, we find that banks substantially inflated their levels of regulatory capital via a reduction in regulatory adjustments — without a commensurate increase in book equity and without a reduction in bank risk. We document substantial heterogeneity in regulatory capital inflation across countries, suggesting that national authorities forbear their domestic banks to meet supranational requirements, with a focus on short-term economic considerations. |
| Free access at | DOI |
| Digital Object Identifier | 10.1017/S002210902300025X |
| Other Identification Number | merlin-id:22716 |
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| Additional Information | Copyright: Cambridge University Press |