Can taxes tame the banks? Evidence from European bank levies
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Can taxes tame the banks? Evidence from European bank levies. / Devereux, Michael P.; Johannesen, Niels; Vella, John .
Kbh. : Economic Policy Research Unit. Department of Economics, University of Copenhagen, 2013.Research output: Working paper › Research
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TY - UNPB
T1 - Can taxes tame the banks?
T2 - Evidence from European bank levies
AU - Devereux, Michael P.
AU - Johannesen, Niels
AU - Vella, John
PY - 2013
Y1 - 2013
N2 - In the wake of the financial crisis, a number of countries have introduced levies on bank borrowing with the aim of reducing risk in the financial sector. This paper studies the behavioral responses to the bank levies and evaluates the policy. We find that the levies induced banks to borrow less but also to hold more risky assets. The reduction in funding risk clearly dominates for banks with high capital ratios but is exactly offset by the increase in portfolio risk for banks with low capital ratios. This suggests that while the levies have reduced the total risk of relatively safe banks, they have done nothing to curb the risk of relatively risky banks, which presumably pose the greatest threat to financial stability
AB - In the wake of the financial crisis, a number of countries have introduced levies on bank borrowing with the aim of reducing risk in the financial sector. This paper studies the behavioral responses to the bank levies and evaluates the policy. We find that the levies induced banks to borrow less but also to hold more risky assets. The reduction in funding risk clearly dominates for banks with high capital ratios but is exactly offset by the increase in portfolio risk for banks with low capital ratios. This suggests that while the levies have reduced the total risk of relatively safe banks, they have done nothing to curb the risk of relatively risky banks, which presumably pose the greatest threat to financial stability
M3 - Working paper
T3 - EPRU Working Paper Series
BT - Can taxes tame the banks?
PB - Economic Policy Research Unit. Department of Economics, University of Copenhagen
CY - Kbh.
ER -
ID: 92696978