This research projects studies a number of important questions related to bank capital regulation such as i) How do bank react to increases in capital requirements, do they cut credit, do they raise capital, does that make them safer and in fact trigger a balance sheet expansion? ii) What are the international spillovers of bank capital regulation? iii) How to pick socially optimal capital requirements?
This project is of utmost relevance to financial stability and macroprudential regulators. Since the global financial crisis, capital regulation has been in constant evolution and there are many issues that remain open questions.