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Market power and banking regulations: Evidence from RDD application to the Brazilian banking market

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  • De Genaro, Alan
  • Salvador, Pedro Ivo Camacho A.
  • Fernandes, Ivan Filipe

Abstract

Using an identification strategy based on the Regression Discontinuity Design (RDD) framework, we assess the impacts of a capital surcharge for domestic systemically important banks (D-SIFIs) in Brazil on consumers’ costs after a regulatory change. We explore the discontinuous application of the regulation, which applies only to banks that present a ratio of total assets over GDP greater than 10%. Our findings suggest that banks are repassing the regulatory costs to their clients, either in higher loans or banking fee income.

Suggested Citation

  • De Genaro, Alan & Salvador, Pedro Ivo Camacho A. & Fernandes, Ivan Filipe, 2021. "Market power and banking regulations: Evidence from RDD application to the Brazilian banking market," Economics Letters, Elsevier, vol. 202(C).
    • Handle: RePEc:eee:ecolet:v:202:y:2021:i:c:s0165176521000987
    DOI: 10.1016/j.econlet.2021.109821
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    References listed on IDEAS

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    1. David S. Lee & Thomas Lemieux, 2010. "Regression Discontinuity Designs in Economics," Journal of Economic Literature, American Economic Association, vol. 48(2), pages 281-355, June.
    2. Zhou, Chen, 2013. "The impact of imposing capital requirements on systemic risk," Journal of Financial Stability, Elsevier, vol. 9(3), pages 320-329.
    3. Sebastian Calonico & Matias D Cattaneo & Max H Farrell, 2020. "Optimal bandwidth choice for robust bias-corrected inference in regression discontinuity designs," The Econometrics Journal, Royal Economic Society, vol. 23(2), pages 192-210.
    4. Gauthier, Céline & Lehar, Alfred & Souissi, Moez, 2012. "Macroprudential capital requirements and systemic risk," Journal of Financial Intermediation, Elsevier, vol. 21(4), pages 594-618.
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    Cited by:

    1. Anson Au, 2024. "Neobanks in emerging markets: a risk assessment," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-8, December.

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