This study investigates the effects on risk and financial stability of the taxes on bank liabilities introduced across European countries after the global financial crisis. Using a difference -in-differences setup, we show that banks responded to the implementation of liability taxes by reducing their interbank exposure, and by increasing both equity, at least in the short term, and the risk weight of their assets. When we consider these adjustments in a microsimulation model for bank portfolio losses, we find that liability taxes reduce risk in the banking sector and could therefore decrease the cost of crises.

Liability taxes, risk, and the cost of banking crises

Bellucci A.;Pagano A.
2023-01-01

Abstract

This study investigates the effects on risk and financial stability of the taxes on bank liabilities introduced across European countries after the global financial crisis. Using a difference -in-differences setup, we show that banks responded to the implementation of liability taxes by reducing their interbank exposure, and by increasing both equity, at least in the short term, and the risk weight of their assets. When we consider these adjustments in a microsimulation model for bank portfolio losses, we find that liability taxes reduce risk in the banking sector and could therefore decrease the cost of crises.
2023
2023
https://www.sciencedirect.com/science/article/pii/S0929119923000366
Financial sector taxation; Banks; Capital structure; Asset risk
Bellucci, A.; Fatica, S.; Heynderickx, W.; Kvedaras, V.; Pagano, A.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11383/2154552
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