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ORCID

Karolina Puławska: 0000-0001-5249-5170

Keywords

bank levy, credit quality, banks, regulations, taxation

Abstract

Policymakers introduce bank levies (BLs) to reduce the probability of crises. In this study, we evaluate the effects of the Hungarian and German BLs implemented in 2010 and 2011, respectively, on the banks’ risk-taking behavior. Our analysis compares two completely different BL designs. The German BL is designed to increase as banks’ total liabilities increase, while the Hungarian BL is assessed on total assets. The results unambiguously demonstrate that a BL on assets increases banks’ credit risk. The results of analyzing the influence that introducing BLs has had on the German banking sector demonstrate that BL on liabilities decreases banks’ credit risk. An improved understanding of the impact of regulation on the risky activity of EU banks is very important for a wide range of financial market participants, including borrowers, shareholders regulators and supervisors, especially during turbulent times caused by the COVID-19 pandemic and the Russian war in Ukraine.

First Page

1

Last Page

25

Page Count

25

Received Date

20 October 2022

Revised Date

18 November 202

Accept Date

2 February 2023

Online Available Date

1 March 2023

DOI

10.7172/2353-6845.jbfe.2023.1.1

JEL Code

G010; G2; G28

Publisher

University of Warsaw

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Business Commons

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