Essays on the Unintended Consequences of Banking Regulation

Ned, John Patrick, Essays on the Unintended Consequences of Banking Regulation. Doctor of Philosophy (Ph.D.), August 18, 2017, 77 pp., 11 tables, references, 34 titles. The introduction of new financial regulatory reforms are designed to usually provide a positive impact for the firms in the banking system. However, there are some unintended consequences to the firms in the banking industry after the introduction of new banking regulations. In the two essays, I examine the impact of introducing new banking regulation on the different firms in the financial services industry and the impact of the new banking regulation on the commercial banks for remaining in compliance with the new measures. The first essay examines the effect of the passage of the Dodd-Frank Act (2010) on the systematic risk of financial services firms, specifically the impact on the different segments of the financial services industry including banks, savings institutions, securities firms, and insurance companies. Additionally, the study examines the effect of the passage of the regulation on the earnings of firms in the different segments. The primary hypotheses examine whether the passage of the Dodd- Frank Act cause an increase in the systematic risk of firms in the different segments of the financial services industry, and did the passage of the Dodd-Frank Act have a significant impact on the earnings of firms in the different segments of the financial services industry. The second essay examines the regulatory burden for U.S. commercial banks after the implementation of large banking regulation using measures of profit, cost and productivity from 1995 to 2014. The large banking regulations that were introduced during this period include the Gramm Leach Bliley Act (1999) and Dodd-Frank Act (2010). The induction of new banking regulations bring additional costs for banks to remain in compliance with the new regulation. What impact does this have on the institutions? Also, the study will examine if the impact of the regulatory change varies depending on the size of the bank. The primary hypotheses examine whether the new banking regulations reduce efficiency for the commercial banks in the U.S., and did the new banking regulations reduce output for the commercial banks in the U.S