Recent financial regulatory reforms target banks’ risk-taking behaviours without considering their ownership and governance. This chapter argues that bank governance influences how regulations alter bank’s incentives. Banks with more powerful owners tend to take more risks, and greater capital requirements actually increase risk-taking in banks with powerful shareholders. Bank regulation should condition on bank governance.
|Title of host publication||The Future of Banking|
|Place of Publication||London|
|Publisher||Centre for Economic Policy Research (CEPR)|
|Number of pages||103|
|Publication status||Published - 2011|