Regulatory oversight and bank risk

Dimitris Chronopoulos; John O. S. Wilson; Muhammed Hasan Yilmaz

doi:10.1016/j.jfs.2023.101105

Regulatory oversight and bank risk

Dimitris Chronopoulos, John O. S. Wilson^*, Muhammed Hasan Yilmaz

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

Abstract

We investigate how a change in regulatory oversight affects bank risk, using the passage of the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 as a setting. Using a sample of bank holding companies (BHCs) covering the period 2015Q1 through 2020Q1, we find that risk increases for large BHCs affected by a change in regulatory oversight. In addition to increasing bank level risk, affected BHCs increase their respective contribution to the systemic risk. These BHCs also experience higher profitability, increased market valuation and reduced compliance costs.

Original language	English
Article number	101105
Number of pages	16
Journal	Journal of Financial Stability
Volume	64
Early online date	21 Jan 2023
DOIs	https://doi.org/10.1016/j.jfs.2023.101105
Publication status	Published - 1 Feb 2023

Keywords

Bank regulation
Bank risk
Difference-in-differences
Dodd-Frank Act
Economic growth
Regulatory relief
Consumer Protection Act

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.1016/j.jfs.2023.101105Licence: CC BY-NC-ND

Chronopoulos_2023_JFS_Regulatoryoversight_CC
Copyright © 2023 The Author(s). Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by- nc-nd/4.0/).
Final published version, 806 KBLicence: CC BY-NC-ND

Cite this

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AB - We investigate how a change in regulatory oversight affects bank risk, using the passage of the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 as a setting. Using a sample of bank holding companies (BHCs) covering the period 2015Q1 through 2020Q1, we find that risk increases for large BHCs affected by a change in regulatory oversight. In addition to increasing bank level risk, affected BHCs increase their respective contribution to the systemic risk. These BHCs also experience higher profitability, increased market valuation and reduced compliance costs.

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KW - Difference-in-differences

KW - Dodd-Frank Act

KW - Economic growth

KW - Regulatory relief

KW - Consumer Protection Act

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Regulatory oversight and bank risk

Abstract

Keywords

UN SDGs

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