This paper has three main aims. First, by applying the Ayadi et al. (2016) approach, we provide fresh evidence of different levels of bank risk (measured by the distance to default), considering the possible specificities across business models of European banking. Second, we try to explain those differences via the adoption of IRB and RWA dispersion, which raises the suspicion of regulatory arbitrage to a different extent across bank business models. Third, we explore whether, and to what extent, the degree of regulatory arbitrage varies across bank business models. Our findings show that one of the five business models identified by Ayadi et al. (2016) is deviant. This is the case for the banks classified as Diversified Retail type 2 which seem to be mutants and systematically engage in regulatory arbitrage. Our conclusion is that bank business models matter in risk assessment and regulation.

Regulatory arbitrage in EU banking: do business model matter? / Pesic, Valerio; Ayadi, Rym; Ferri, Giovanni. - STAMPA. - (2016), pp. 165-178.

Regulatory arbitrage in EU banking: do business model matter?

PESIC, Valerio
;
2016

Abstract

This paper has three main aims. First, by applying the Ayadi et al. (2016) approach, we provide fresh evidence of different levels of bank risk (measured by the distance to default), considering the possible specificities across business models of European banking. Second, we try to explain those differences via the adoption of IRB and RWA dispersion, which raises the suspicion of regulatory arbitrage to a different extent across bank business models. Third, we explore whether, and to what extent, the degree of regulatory arbitrage varies across bank business models. Our findings show that one of the five business models identified by Ayadi et al. (2016) is deviant. This is the case for the banks classified as Diversified Retail type 2 which seem to be mutants and systematically engage in regulatory arbitrage. Our conclusion is that bank business models matter in risk assessment and regulation.
2016
The Italian banks: which will be the "New Normal" - Industrial, Institutional and Behavioural Economics
978-88-449-1106-5
Bank risk
02 Pubblicazione su volume::02a Capitolo o Articolo
Regulatory arbitrage in EU banking: do business model matter? / Pesic, Valerio; Ayadi, Rym; Ferri, Giovanni. - STAMPA. - (2016), pp. 165-178.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11573/912759
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