Choi, Dong Beom
[VerfasserIn]
;
Holcomb, Michael R.
[Sonstige Person, Familie und Körperschaft];
Morgan, Donald P.
[Sonstige Person, Familie und Körperschaft]
Erschienen in:FRB of New York Staff Report ; No. 856
Umfang:
1 Online-Ressource (43 p)
Sprache:
Englisch
DOI:
10.2139/ssrn.3199997
Identifikator:
Entstehung:
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments June 1, 2018 erstellt
Beschreibung:
Banks are regulated more than most firms, making them good subjects to study regulatory arbitrage (avoidance). Their latest arbitrage opportunity may be the new leverage rule covering the largest U.S. banks; leverage rules require equal capital against assets with unequal risks, so banks can effectively relax the leverage constraint by increasing asset risk. Consistent with that conjecture, we find that banks covered by the new rule shifted to riskier, higher yielding securities relative to control banks. The shift began almost precisely when the rule was finalized in 2014, well before it took effect in 2018. Security-level analysis suggests banks actively added riskier securities, rather than merely shedding safer ones. Despite the risk-shifting, overall bank risk did not increase, evidently because the banks most constrained by the new leverage rule significantly increased leverage capital ratios