TY - JOUR
T1 - Failure of capital requirements regulation in the banking industry
T2 - Evidence from a bank-based financial system
AU - Muzzupappa, Eleonora
AU - Leonida, Leone
AU - Limosani, Michele
N1 - Publisher Copyright:
© AESP 2020.
Copyright:
Copyright 2021 Elsevier B.V., All rights reserved.
PY - 2020
Y1 - 2020
N2 - This article studies the impact of Basel I and Basel II regulation in a bank-based financial system on the degree of competition in the banking sector, as measured via the Panzar and Rosse statistic. Strikingly, our results suggest that, contrary to the regulator’s expectation, stability-oriented regulation reduces competition in the banking sector. Further analysis suggests that while Basel does not have a significant impact on the large banks, it reduces competition among other banks, which move towards uncompetitive dynamics. This shift towards monopoly is aligned with the hypothesis of this regulation to create competitive advantages for large banks at the expense of the others.
AB - This article studies the impact of Basel I and Basel II regulation in a bank-based financial system on the degree of competition in the banking sector, as measured via the Panzar and Rosse statistic. Strikingly, our results suggest that, contrary to the regulator’s expectation, stability-oriented regulation reduces competition in the banking sector. Further analysis suggests that while Basel does not have a significant impact on the large banks, it reduces competition among other banks, which move towards uncompetitive dynamics. This shift towards monopoly is aligned with the hypothesis of this regulation to create competitive advantages for large banks at the expense of the others.
KW - Banking system
KW - Competition
KW - Regulation
UR - http://www.scopus.com/inward/record.url?scp=85111638022&partnerID=8YFLogxK
U2 - 10.1332/251569120X15822103468603
DO - 10.1332/251569120X15822103468603
M3 - Article
AN - SCOPUS:85111638022
SN - 2515-6918
VL - 35
SP - 63
EP - 79
JO - Journal of Public Finance and Public Choice
JF - Journal of Public Finance and Public Choice
IS - 1
ER -
