The Limits of Model-Based Regulation

• 成果类型: Article
• 署名作者: Behn, Markus; Haselmann, Rainer; Vig, Vikrant
• 署名单位: European Central Bank; Goethe University Frankfurt; Centre for Economic Policy Research - UK; University of London; London Business School; Northwestern University
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.13124
• 发表日期: 2022
• 页码: 1635-1684
• 关键词: dummy variables; RISK

摘要

Using loan-level data from Germany, we investigate how the introduction of model-based capital regulation affected banks' ability to absorb shocks. The objective of this regulation was to enhance financial stability by making capital requirements responsive to asset risk. Our evidence suggests that banks optimized model-based regulation to lower their capital requirements. Banks systematically underreported risk, with underreporting more pronounced for banks with higher gains from it. Moreover, large banks benefitted from the regulation at the expense of smaller banks. Overall, our results suggest that sophisticated rules may have undesired effects if strategic misbehavior is difficult to detect.