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International Prudential Regulation, Regulatory Risk and Cost of Bank Capital


Ngo, Phong T. H. (2007) International Prudential Regulation, Regulatory Risk and Cost of Bank Capital. The International Journal of Banking and Finance, 5 (1). pp. 27-58. ISSN 1617-722

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Abstract

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.

Item Type: Article
Uncontrolled Keywords: Basel Accord, bank capital regulation, cost of capital, regulatory risk, international harmonization.
Subjects: H Social Sciences > HG Finance
Divisions: School of Economics, Finance & Banking
Depositing User: Mrs. Norazmilah Yaakub
Date Deposited: 31 Oct 2018 01:08
Last Modified: 31 Oct 2018 01:08
URI: http://repo.uum.edu.my/id/eprint/25098

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