Leverage Regulation and Market Structure: A Structural Model of the U.K. Mortgage Market

Autor:	Matteo Benetton
Rok vydání:	2021
Předmět:	Counterfactual thinking Marginal cost Competition (economics) Economics and Econometrics Market structure Leverage (finance) Basis point Accounting Economics Equity (finance) Capital requirement Monetary economics Finance
Zdroj:	The Journal of Finance. 76:2997-3053
ISSN:	1540-6261 0022-1082
DOI:	10.1111/jofi.13072
Popis:	I develop a structural model of mortgage demand and lender competition to study how leverage regulation affects the U.K. mortgage market. Using variation in risk‐weighted capital requirements across lenders and mortgages with different loan‐to‐values (LTVs), I show that a 1‐percentage‐point increase in risk‐weighted capital requirements increases lenders' marginal cost of originating mortgages by about 26 basis points (11%) on average. I use the estimated model to study proposed leverage regulations. Counterfactual analyses show that large lenders exploit a regulatory cost advantage, which increases concentration by about 20%, and suggest that banning high‐LTV mortgages may reduce large lenders' equity buffer.
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_________::e2a5f0ae42c5211e56094e07f7995ef6 https://doi.org/10.1111/jofi.13072 Zobrazit plný text záznamu Plný text ve formátu PDF