International Prudential Regulation, Regulatory Risk and Cost of Bank Capital

Authors

  • Phong T. H. Ngo Australian National University, Australia

DOI:

https://doi.org/10.32890/ijbf2008.5.1.2

Keywords:

Basel Accord, bank capital regulation, cost of capital, regulatory risk, international harmonization

Abstract

We define regulatory risk as regulation that leads to an increase in the cost of capital for a regulated firm. In a general equilibrium setting, scholars have shown that uniform increases in capital requirements lead to an increase in the cost of capital. We extend their model to show that when regulatory standards differ across countries, financial integration leads to positive spillovers that reduce the cost of capital mark up for a given increase in bank capital. Accordingly, regulatory risk may be greater under a regulatory agreement such as the Basel Accord, which imposes international uniformity in capital ratios.

 

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Published

04-03-2008

Issue

Vol. 5 No. 1 (2008): International Journal of Banking and Finance (IJBF) Vol. 5, No.1, 2008

Section

Articles

How to Cite

Ngo, P. T. H. (2008). International Prudential Regulation, Regulatory Risk and Cost of Bank Capital. International Journal of Banking and Finance, 5(1), 27-58. https://doi.org/10.32890/ijbf2008.5.1.2

Research impact

Harvested 2026-09-14
2 citations, from OpenAlex — the highest of the sources checked

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Identifiers DOI 10.32890/ijbf2008.5.1.2 OpenAlex W2133412182