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The Spillover Effects of Prudential Regulation on Banking Competition

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  2. Economics, Finance, Business & Management
  3. Vierteljahrshefte zur Wirtschaftsforschung
  4. Vol. 89, Issue 1
  5. pp. 59–100

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Ferri, G., Pesic, V. The Spillover Effects of Prudential Regulation on Banking Competition. Vierteljahrshefte zur Wirtschaftsforschung, 89(1), 59-100. https://doi.org/10.3790/vjh.89.1.59
Ferri, Giovanni and Pesic, Valerio "The Spillover Effects of Prudential Regulation on Banking Competition" Vierteljahrshefte zur Wirtschaftsforschung 89.1, , 59-100. https://doi.org/10.3790/vjh.89.1.59
Ferri, Giovanni/Pesic, Valerio: The Spillover Effects of Prudential Regulation on Banking Competition, in: Vierteljahrshefte zur Wirtschaftsforschung, vol. 89, iss. 1, 59-100, [online] https://doi.org/10.3790/vjh.89.1.59
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The Spillover Effects of Prudential Regulation on Banking Competition

Ferri, Giovanni | Pesic, Valerio

Vierteljahrshefte zur Wirtschaftsforschung, Vol. 89 (2020), Iss. 1 : pp. 59–100

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Publisher Name
Duncker & Humblot
DOI
https://doi.org/10.3790/vjh.89.1.59
Language
English
Pages
41
Keywords

Author Details

Giovanni Ferri, Lumsa University (Rome)

  • Giovanni Ferri, Ph.D., full professor of Economics at LUMSA, Rome, where he directs the Master in Management of Sustainable Development Goals (http://mastermsdg.lumsa.it). Prior to that he worked at the University of Bari, the World Bank and the Banca d’Italia. He visited: Hong Kong Monetary Authority, University of Tokyo, Asian Development Bank Institute (Tokyo), Princeton University, NBER. He is editor-in-chief of Economic Notes and of the Journal of Entrepreneurial and Organizational Diversity. He has led (or participated in) research and policy projects in Europe, the Middle East and East Asia. He conducts research on: money, banking and finance, rating agencies, corporate governance, finance-growth links, family business, migration, company internationalization, Chinese economy, inequality, sustainability.
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Valerio Pesic, Sapienza University (Rome)

  • Valerio Pesic, Ph.D., Associate Professor of Banking and Finance at Sapienza University of Rome, where he teaches “Corporate Finance” and “Corporate and Investment Banking”. He conducts research on: banking strategies and organization, bank business models and performance evaluation, internal control systems & risk management, private equity & venture capital, corporate finance.
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Abstract

Summary: European supervisors aggressively requested more capital at large banks. That may cut credit to the economy. We confirm that especially larger banks cut loans while less-significant banks partly offset that credit drop. Moreover, we identify nasty spillovers from that interaction. Specifically, larger banks’ deleveraging was associated with significant portfolio worsening for mid-sized banks. We conjecture that while small banks’ loan expansion was somewhat shielded by superior soft-information-based technologies, medium-sized banks were fully exposed to lending to bad borrowers as they boosted loans by relying on credit scoring and Internal Rating Based models. That is proving tricky through the prolonged European dip.

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