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The More the Merrier? Detecting Impacts of Bank Regulation After the Global Financial Crisis

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  4. Vol. 52, Issue 2
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Kalhoefer, C., Lang, G. The More the Merrier? Detecting Impacts of Bank Regulation After the Global Financial Crisis. Credit and Capital Markets – Kredit und Kapital, 52(2), 191-212. https://doi.org/10.3790/ccm.52.2.191
Kalhoefer, Christian and Lang, Guenter "The More the Merrier? Detecting Impacts of Bank Regulation After the Global Financial Crisis" Credit and Capital Markets – Kredit und Kapital 52.2, 2019, 191-212. https://doi.org/10.3790/ccm.52.2.191
Kalhoefer, Christian/Lang, Guenter (2019): The More the Merrier? Detecting Impacts of Bank Regulation After the Global Financial Crisis, in: Credit and Capital Markets – Kredit und Kapital, vol. 52, iss. 2, 191-212, [online] https://doi.org/10.3790/ccm.52.2.191
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The More the Merrier? Detecting Impacts of Bank Regulation After the Global Financial Crisis

Kalhoefer, Christian | Lang, Guenter

Credit and Capital Markets – Kredit und Kapital, Vol. 52 (2019), Iss. 2 : pp. 191–212

1 Citations (CrossRef)

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Article Details

Publisher Name
Duncker & Humblot
DOI
https://doi.org/10.3790/ccm.52.2.191
Language
English
Pages
22
Keywords

Author Details

Prof. Dr. Christian Kalhoefer, ADG Business School/Steinbeis University, 56410 Montabaur, Germany

Prof. Dr. Guenter Lang, Kuehne Logistics University, 20457 Hamburg, Germany

Cited By

  1. Values-Based and Global Systemically Important Banks: Their Stability and the Impact of Regulatory Changes After the Financial Crisis on it

    Schäfer, Theresa

    Utz, Sebastian

    Asia-Pacific Financial Markets, Vol. 29 (2022), Iss. 1 P.5

    https://doi.org/10.1007/s10690-021-09332-w [Citations: 6]

References

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  2. Amel, D./Barnes, C./Panetta, F./Salleo, C. (2004): Consolidation and Efficiency in the Financial Sector: A Review of the International Evidence, Journal of Banking and Finance, 28, 2493–2515.  Google Scholar
  3. Baltagi, B. H. (1995): Econometric Analysis of Panel Data, John Wiley and Sons.  Google Scholar
  4. Barth, J. R./Caprio, G. jr./Levine, R. (2012): The Evolution and Impact of Bank Regulations, The World Bank, Policy Research Working Paper 6288.  Google Scholar
  5. Becalli, E./Anolli, M./Borello, G. (2015): Are European Banks too Big? Evidence on Economies of Scale, Journal of Banking and Finance, 58, 232–246.  Google Scholar
  6. Berger, A. N./Humphrey, D. B. (1992): Measurement and Efficiency Issues in Commercial Banking. In: Griliches, Z. (Ed.), Output Measurement in the Service Sectors, National Bureau of Economic Research Studies in Income and Wealth, University of Chicago Press, 245–300.  Google Scholar
  7. Berger, A. N./Mester, L. J. (1997): Inside the Black Box: What Explains Differences in the Efficiencies of Financial Institutions?, Journal of Banking and Finance, 21, 895–947.  Google Scholar
  8. Blitz, R. C./Long, M. F. (1965): The Economics of Usury Regulation, Journal of Political Economy, 73, 608–619.  Google Scholar
  9. Cecchetti, S. G. (2015): The Road to Financial Stability: Capital Regulation, Liquidity Regulation, and Resolution, International Journal of Central Banking, 11, 127–139.  Google Scholar
  10. Coelli, T. J./Rao, D. S. P./O’Donnell, C. J./Battese, G. E. (2005): Introduction to Efficiency and Productivity Analysis. Berlin: Springer.  Google Scholar
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  14. Fiorentino, E./Karmann, A./Koetter, M. (2006): The Cost Efficiency of German Banks: A Comparison of SFA and DEA, SSRN, dx.doi.org/10.2139/ssrn.947340.  Google Scholar
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  16. Johnson, W. F. (2011): International Economic Freedoms, Banks and the Market Crisis of 2007–2009, Journal of Banking Regulation, 12, 195–209.  Google Scholar
  17. Kolaric, S./Schiereck, D. (2014): Performance of Bank Mergers and Acquisitions: A Review of the Recent Empirical Evidence, Management Review Quarterly, 64, 39–71.  Google Scholar
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  24. Maredza, A. (2016): Do Capital Requirements affect Cost of Intermediation? Evidence from a Panel of South African Banks, The Journal of Developing Areas, 50, 35–51.  Google Scholar
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  28. Pasiouras, F./Tanna, S./Zopounidis, C. (2009): The Impact of Banking Regulations on Banks’ Cost and Profit Efficiency: Cross-Country Evidence, International Review of Financial Analysis, 18, 294–302.  Google Scholar
  29. Quaglia, L./Spendzharova, A. (2017): The Conundrum of Solving Too Big to Fail in the European Union: Supranationalization at Different Speeds, Journal of Common Market Studies, doi 10.1111/jcms.12531.  Google Scholar
  30. Restrepo-Tobon, D./Kumbhakar, S. C./Sun, K. (2015): Obelix vs. Asterix: Size of US commercial banks and its regulatory challenge, Journal of Regulatory Economics, 48, 125–168.  Google Scholar
  31. Sherman, M. (2009): A Short History of Financial Deregulation in the United States, Center for Economic and Policy Research, Washington.  Google Scholar
  32. Starzec, M. L. (2013): The Legal History of Credit in Four Thousand Years, Loyola Consumer Law Review, 26, 107–139.  Google Scholar
  33. WSBI & ESBG (2015): Financial Systems in Europe and in the US: Structural Differences where Banks remain the Main Source of Finance for Companies, www.wsbi-esbg.org.  Google Scholar
  34. Zhu, S./Ellinger, P. N./Shumway, R. C. (2006): The Choice of Functional Form and Estimation of Banking Inefficiency, Applied Economics Letters, vol. 2, 375–379.  Google Scholar
  35. Almeida, L. A. A. (2014): The Impact of Capital Regulation on Bank’s Cost and Profit Efficiency under Stressful Conditions: Cross-Country Evidence, dissertation, Universidade Católica Portuguesa.  Google Scholar
  36. Amel, D./Barnes, C./Panetta, F./Salleo, C. (2004): Consolidation and Efficiency in the Financial Sector: A Review of the International Evidence, Journal of Banking and Finance, 28, 2493–2515.  Google Scholar
  37. Baltagi, B. H. (1995): Econometric Analysis of Panel Data, John Wiley and Sons.  Google Scholar
  38. Barth, J. R./Caprio, G. jr./Levine, R. (2012): The Evolution and Impact of Bank Regulations, The World Bank, Policy Research Working Paper 6288.  Google Scholar
  39. Becalli, E./Anolli, M./Borello, G. (2015): Are European Banks too Big? Evidence on Economies of Scale, Journal of Banking and Finance, 58, 232–246.  Google Scholar
  40. Berger, A. N./Humphrey, D. B. (1992): Measurement and Efficiency Issues in Commercial Banking. In: Griliches, Z. (Ed.), Output Measurement in the Service Sectors, National Bureau of Economic Research Studies in Income and Wealth, University of Chicago Press, 245–300.  Google Scholar
  41. Berger, A. N./Mester, L. J. (1997): Inside the Black Box: What Explains Differences in the Efficiencies of Financial Institutions?, Journal of Banking and Finance, 21, 895–947.  Google Scholar
  42. Blitz, R. C./Long, M. F. (1965): The Economics of Usury Regulation, Journal of Political Economy, 73, 608–619.  Google Scholar
  43. Cecchetti, S. G. (2015): The Road to Financial Stability: Capital Regulation, Liquidity Regulation, and Resolution, International Journal of Central Banking, 11, 127–139.  Google Scholar
  44. Coelli, T. J./Rao, D. S. P./O’Donnell, C. J./Battese, G. E. (2005): Introduction to Efficiency and Productivity Analysis. Berlin: Springer.  Google Scholar
  45. Christensen, L. R./Jorgenson, D. W./Lau, L. J. (1973): Transcendental Logarithmic Production Functions, The Review of Economics and Statistics, 55, 28–45.  Google Scholar
  46. Diewert, E. W./Wales, T. J. (1987): Flexible Functional Forms and Global Curvature Conditions, Econometrica, vol. 55, 43–68.  Google Scholar
  47. Ferri, G. (2016): The Evolution of Banking Regulation in the Post-Crisis Period: Cooperative and Savings Banks Perspective, in: Miklaszewska, Ewa (ed.), Institutional Diversity in Banking. Palgrave Macmillan Studies in Banking and Financial Institutions. Palgrave Macmillan, 1–31.  Google Scholar
  48. Fiorentino, E./Karmann, A./Koetter, M. (2006): The Cost Efficiency of German Banks: A Comparison of SFA and DEA, SSRN, dx.doi.org/10.2139/ssrn.947340.  Google Scholar
  49. G20 Research Group (2011): The G20 Washington Summit Commitments, University of Toronto.  Google Scholar
  50. Johnson, W. F. (2011): International Economic Freedoms, Banks and the Market Crisis of 2007–2009, Journal of Banking Regulation, 12, 195–209.  Google Scholar
  51. Kolaric, S./Schiereck, D. (2014): Performance of Bank Mergers and Acquisitions: A Review of the Recent Empirical Evidence, Management Review Quarterly, 64, 39–71.  Google Scholar
  52. Kopp, R. J. (1981): The Measurement of Productive Efficiency: A Reconsideration, Quarterly Journal of Economics, 96, 477–503.  Google Scholar
  53. Kumar, S./Gulati, R. (2013): A Survey of Empirical Literature on Bank Efficiency, in: Kumar & Gulati (eds.), Deregulation and Efficiency of Indian Banks, Springer India, New Delhi, 119–165.  Google Scholar
  54. Kutlu, L./Liu, S./Sickles, R. C. (2019): Cost, Revenue, and Profit Function Estimates, in: Ray, Subhash C., Chambers, Robert G, Kumbhakar, Subal C. (eds), Handbook of Production Economics, Springer New York, 1–48.  Google Scholar
  55. Lane, P. R. (2012): The European Sovereign Debt Crisis, Journal of Economic Perspectives, 26, 49–68.  Google Scholar
  56. Lang, G./Welzel, P. (1998): Technology and Cost Efficiency in Universal Banking: A “Thick Frontier” – Analysis of the German Banking Industry, Journal of Productivity Analysis, 10, 63–84.  Google Scholar
  57. Lozano-Vivas, A./Pasiouras, F. (2010): The Impact of Non-Traditional Activities on the Estimation of Bank Efficiency: International Evidence, Journal of Banking and Finance, 34, 1438–1449.  Google Scholar
  58. Maredza, A. (2016): Do Capital Requirements affect Cost of Intermediation? Evidence from a Panel of South African Banks, The Journal of Developing Areas, 50, 35–51.  Google Scholar
  59. Mishkin, F. S. (2011): Over the Cliff: From the Subprime to the Global Financial Crisis, The Journal of Economic Perspectives, 25, 49–70.  Google Scholar
  60. Otker-Robe, I. (2011): Addressing the Too-Big-to-Fail Problem before the Banks become Too-Big-to-Save, The World Bank, www.blogs.worldbank.org.  Google Scholar
  61. Pasiouras, F. (2008): International Evidence on the Impact of Regulations and Super vision on Banks’ Technical Efficiency: An Application of Two-Stage Data Envelopment Analysis, Review of Quantitative Financial Accounting, 30, 187–223.  Google Scholar
  62. Pasiouras, F./Tanna, S./Zopounidis, C. (2009): The Impact of Banking Regulations on Banks’ Cost and Profit Efficiency: Cross-Country Evidence, International Review of Financial Analysis, 18, 294–302.  Google Scholar
  63. Quaglia, L./Spendzharova, A. (2017): The Conundrum of Solving Too Big to Fail in the European Union: Supranationalization at Different Speeds, Journal of Common Market Studies, doi 10.1111/jcms.12531.  Google Scholar
  64. Restrepo-Tobon, D./Kumbhakar, S. C./Sun, K. (2015): Obelix vs. Asterix: Size of US commercial banks and its regulatory challenge, Journal of Regulatory Economics, 48, 125–168.  Google Scholar
  65. Sherman, M. (2009): A Short History of Financial Deregulation in the United States, Center for Economic and Policy Research, Washington.  Google Scholar
  66. Starzec, M. L. (2013): The Legal History of Credit in Four Thousand Years, Loyola Consumer Law Review, 26, 107–139.  Google Scholar
  67. WSBI & ESBG (2015): Financial Systems in Europe and in the US: Structural Differences where Banks remain the Main Source of Finance for Companies, www.wsbi-esbg.org.  Google Scholar
  68. Zhu, S./Ellinger, P. N./Shumway, R. C. (2006): The Choice of Functional Form and Estimation of Banking Inefficiency, Applied Economics Letters, vol. 2, 375–379.  Google Scholar

Abstract

Governments worldwide reacted swiftly to the global financial crisis by tougher regulations. This paper investigates the impacts of the regulatory environment on operating costs using panel data of 2,200 German banks over the timeframe from 1999 to 2014. We estimate cost functions with and without proxies for regulation and analyze the results with respect to period, bank size, and group affiliation. Our results show that regulatory costs were peaking in 2001, 2008, and lately since 2012. Most interesting, however, is the asymmetry of regulation: Whereas the cost effects were symmetric for all banks until 2003, the last ten years were different. Larger institutions and savings banks could neutralize the impacts of increasing regulation on operating costs. In contrast, smaller banks, especially if they are cooperative banks, were facing significant cost increases. We therefore expect unintended structural shifts like a reduction in the diversity of banks, which are negative for competition, service quality, and for the stability of the financial system.

Table of Contents

Section Title Page Action Price
Christian Kalhoefer / Guenter Lang: The More the Merrier? Detecting Impacts of Bank Regulation After the Global Financial Crisis 1
Abstract 1
Zusammenfassung: Immer mehr, immer besser? Eine Abschätzung der Regulierungsfolgen im Bankensektor nach der Globalen Finanzkrise 1
I. Introduction 2
II. Methodological Procedure 4
III. Data 8
IV. Empirical Results 9
V. Conclusion 1
References 1
Appendix 1

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