Abstract
| Original language | English |
|---|---|
| Journal | European Financial Management |
| Volume | 25 |
| Issue number | 5 |
| Pages (from-to) | 1229-1248 |
| Number of pages | 20 |
| ISSN | 1354-7798 |
| DOIs | |
| Publication status | Published - Nov 2019 |
Bibliographical note
Published online: 11. November 2018Keywords
- Banks
- Asset risk
- Credit risk
- Portfolio choice
- Risk-based capital regulation
Cite this
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The Effect of Stricter Capital Regulation on Banks' Risk‐Taking : Theory and Evidence. / Lundtofte, Frederik; Nielsen, Caren Yinxia.
In: European Financial Management, Vol. 25, No. 5, 11.2019, p. 1229-1248.Research output: Contribution to journal › Journal article › Research › peer-review
TY - JOUR
T1 - The Effect of Stricter Capital Regulation on Banks' Risk‐Taking
T2 - Theory and Evidence
AU - Lundtofte, Frederik
AU - Nielsen, Caren Yinxia
N1 - Published online: 11. November 2018
PY - 2019/11
Y1 - 2019/11
N2 - A simple portfolio choice model shows that, when a bank's capital is constrained by regulation, regulatory cost (risk weightings) alters the risk and value calculations for the bank's assets. In particular, we find that banks may respond to stricter regulation by increasing the share of high‐risk assets. Our empirical results show that U.S. banks responded to the implementation of the stricter Basel II regulations by increasing the share of high‐risk assets in the risky part of their portfolios.
AB - A simple portfolio choice model shows that, when a bank's capital is constrained by regulation, regulatory cost (risk weightings) alters the risk and value calculations for the bank's assets. In particular, we find that banks may respond to stricter regulation by increasing the share of high‐risk assets. Our empirical results show that U.S. banks responded to the implementation of the stricter Basel II regulations by increasing the share of high‐risk assets in the risky part of their portfolios.
KW - Banks
KW - Asset risk
KW - Credit risk
KW - Portfolio choice
KW - Risk-based capital regulation
KW - Banks
KW - Asset risk
KW - Credit risk
KW - Portfolio choice
KW - Risk-based capital regulation
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U2 - 10.1111/eufm.12205
DO - 10.1111/eufm.12205
M3 - Journal article
VL - 25
SP - 1229
EP - 1248
JO - European Financial Management
JF - European Financial Management
SN - 1354-7798
IS - 5
ER -