Macroeconomic Shocks and Banking Regulation

Dewatripont, Mathias and Tirole, Jean (2012) Macroeconomic Shocks and Banking Regulation. Journal of Money, Credit and Banking, 44. pp. 237-254.

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Official URL: http://tse-fr.eu/pub/26128

Abstract

The recent crisis has brought to the fore the cyclical properties of banking regulation. Countercyclical buffers and enhanced capital requirements meant to stabilize banks' balance sheets across the cycle are not costless, and a delicate balance needs to be reached between providing incentives to generate value and discouraging excessive risk-taking.

The paper develops a model in which, in contrast with Modigliani-Miller, outside equity and capital requirements matter. It analyses banking regulation in the presence of macroeconomic shocks and studies the desirability of self-insurance mechanisms such as countercyclical capital buffers or dynamic provisioning, as well as "macro-hedges" such as CoCos and capital insurance.

Item Type: Article
Language: English
Date: December 2012
Refereed: Yes
Uncontrolled Keywords: Banking regulation, macroeconomic shocks, countercyclical capital requirements
JEL codes: E32 - Business Fluctuations; Cycles
G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
G28 - Government Policy and Regulation
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 09 Jul 2014 17:28
Last Modified: 07 Mar 2018 13:22
OAI ID: oai:tse-fr.eu:26128
URI: http://publications.ut-capitole.fr/id/eprint/15376

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