Market power and banking regulations: Evidence from RDD application to the Brazilian banking market

Using an identification strategy based on the Regression Discontinuity Design (RDD) framework, we assess the impacts of a capital surcharge for domestic systemically important banks (D-SIFIs) in Brazil on consumers' costs after a regulatory change. We explore the discontinuous application of the regulation, which applies only to banks that present a ratio of total assets over GDP greater than 10%. Our findings suggest that banks are repassing the regulatory costs to their clients, either in higher loans or banking fee income. (c) 2021 Elsevier B.V. All rights reserved.