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The Dark Side of Prudential Measures

Author

Listed:
  • Paulo Roberto Scalco

    (FACE-UFG)

  • Benjamin M. Tabak
  • Anderson Mutter Teixeira

    (FACE/UFG)

Abstract

In the aftermath of the financial crisis of 2008 and 2009, there is a series of changes in the scenario of financial regulation. Globally, several macroprudential measures that seek to limit systemic risk are currently in use. We evaluated the e ect of these measures on the market power of banks in the Brazilian case, in which there was a process of great banking concentration that coexists with high bank spreads. Using an innovative methodology, we show that the e ect of macroprudential measures is to reduce bank competition by increasing the market power of banks. It is essential that financial regulators consider this adverse effect in the design of a financial regulation that not only aims at financial stability but also a more competitive banking system.

Suggested Citation

  • Paulo Roberto Scalco & Benjamin M. Tabak & Anderson Mutter Teixeira, 2019. "The Dark Side of Prudential Measures," Working papers - Textos para Discussao do Curso de Ciencias Economicas da UFG 078, Curso de Ciencias Economicas da Universidade Federal de Goias - FACE.
    • Handle: RePEc:ufb:wpaper:078
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    References listed on IDEAS

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    Keywords

    Bank Regulation; Prudential Measures; Market Power; Lerner Index; Stochastic Frontier.;
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