Template-type: ReDIF-Paper 1.0
Author-Name: Pierre C. Boyer
Author-Name: Hubert Kempf
Title: Regulatory arbitrage and the efficiency of banking regulation
Abstract: We study the effciency of banking regulation under ?nancial integration. Banks freely choose the jurisdiction where to locate their activities and have private information about their e?ciency level. Regulators non-cooperatively offer any regulatory contract that satis?es information and participation constraints of banks. We show that the unique Nash equilibrium of the regulatory game is a simple pooling contract: ?nancial integration is characterized by the inability for regulators to discriminate between banks with different efficiency levels. This result is driven by the endogenous restriction caused by regulatory arbitrage on the capacity of regulators to use several regulatory instruments.
Classification-JEL: C72, D82, G21, G28
Keywords:  Regulatory Arbitrage, Banking regulation, Regulatory competition, Financial integration, Asymmetric information
Length: 40 pages 
Number: 1618
Creation-Date: 2016
File-URL: https://repec.unibocconi.it/baffic/baf/papers/cbafwp1618.pdf
File-Format: application/pdf
File-Size: 613
Handle: RePEc:baf:cbafwp:cbafwp1618