International Prudential Regulation, Regulatory Risk and Cost of Bank Capital

We define regulatory risk as regulation that leads to an increase in the cost of capital for a regulated firm. In a general equilibrium setting, scholars have shown that uniform increases in capital requirements lead to an increase in the cost of capital. We extend their model to show that when regu...

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Main Author:	Phong Ngo
Format:	Article
Language:	English
Published:	Universiti Utara Malaysia 2008-02-01
Series:	International Journal of Banking and Finance
Online Access:	https://www.scienceopen.com/document?vid=9560f5cc-58bd-4696-b7b2-2fd42ee9c0f3

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spelling	doaj-5c44d46ecac94deba9fa787b2cc128df2021-06-15T13:16:54ZengUniversiti Utara MalaysiaInternational Journal of Banking and Finance1675-722X2008-02-0110.32890/ijbf2008.5.1.8358International Prudential Regulation, Regulatory Risk and Cost of Bank CapitalPhong NgoWe define regulatory risk as regulation that leads to an increase in the cost of capital for a regulated firm. In a general equilibrium setting, scholars have shown that uniform increases in capital requirements lead to an increase in the cost of capital. We extend their model to show that when regulatory standards differ across countries, financial integration leads to positive spillovers that reduce the cost of capital mark up for a given increase in bank capital. Accordingly, regulatory risk may be greater under a regulatory agreement such as the Basel Accord, which imposes international uniformity in capital ratios. https://www.scienceopen.com/document?vid=9560f5cc-58bd-4696-b7b2-2fd42ee9c0f3
collection	DOAJ
language	English
format	Article
sources	DOAJ
author	Phong Ngo
spellingShingle	Phong Ngo International Prudential Regulation, Regulatory Risk and Cost of Bank Capital International Journal of Banking and Finance
author_facet	Phong Ngo
author_sort	Phong Ngo
title	International Prudential Regulation, Regulatory Risk and Cost of Bank Capital
title_short	International Prudential Regulation, Regulatory Risk and Cost of Bank Capital
title_full	International Prudential Regulation, Regulatory Risk and Cost of Bank Capital
title_fullStr	International Prudential Regulation, Regulatory Risk and Cost of Bank Capital
title_full_unstemmed	International Prudential Regulation, Regulatory Risk and Cost of Bank Capital
title_sort	international prudential regulation, regulatory risk and cost of bank capital
publisher	Universiti Utara Malaysia
series	International Journal of Banking and Finance
issn	1675-722X
publishDate	2008-02-01
description	We define regulatory risk as regulation that leads to an increase in the cost of capital for a regulated firm. In a general equilibrium setting, scholars have shown that uniform increases in capital requirements lead to an increase in the cost of capital. We extend their model to show that when regulatory standards differ across countries, financial integration leads to positive spillovers that reduce the cost of capital mark up for a given increase in bank capital. Accordingly, regulatory risk may be greater under a regulatory agreement such as the Basel Accord, which imposes international uniformity in capital ratios.
url	https://www.scienceopen.com/document?vid=9560f5cc-58bd-4696-b7b2-2fd42ee9c0f3
work_keys_str_mv	AT phongngo internationalprudentialregulationregulatoryriskandcostofbankcapital
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International Prudential Regulation, Regulatory Risk and Cost of Bank Capital

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