Capital Regulation (capital + regulation)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting100%

Selected Abstracts

Bank Capital Regulation in Contemporary Banking Theory: A Review of the Literature

FINANCIAL MARKETS, INSTITUTIONS & INSTRUMENTS, Issue 2 2001
João A. C. Santos
This paper reviews the theoretical literature on bank capital regulation and analyzes some of the approaches to redesigning the 1988 Basel Accord on capital standards. The paper starts with a review of the literature on the design of the financial system and the existence of banks. It proceeds with a presentation of the market failures that justify banking regulation and an analysis of the mechanisms that have been suggested to deal with these failures. The paper then reviews the theoretical literature on bank capital regulation. This is followed by a brief history of capital regulation since the 1988 Basel Capital Accord and a presentation of both the alternative approaches that have been put forward on setting capital standards and the Basel Committee's proposal for a new capital adequacy framework. [source]

Are Bank Holding Companies a Source of Strength to Their Banking Subsidiaries?

JOURNAL OF MONEY, CREDIT AND BANKING, Issue 2-3 2008
ADAM B. ASHCRAFT
source-of-strength doctrine; cross-guarantee provision; bank capital regulation I document evidence that a bank affiliated with a multi-bank holding company (MBHC) is significantly safer than either a stand-alone bank or a bank affiliated with a one-bank holding company. Not only does MBHC affiliation reduce the probability of future financial distress, but distressed affiliated banks are also more likely to receive capital injections, recover more quickly, and are less likely to fail over the next year. Moreover, the measured benefits of affiliation are much larger than those that existed before recent reforms of bank holding company regulation, suggesting that much of the observed benefit can be attributed to regulation and not the market. [source]

Presidential Address: Sophisticated Investors and Market Efficiency

THE JOURNAL OF FINANCE, Issue 4 2009
JEREMY C. STEIN
ABSTRACT Stock-market trading is increasingly dominated by sophisticated professionals, as opposed to individual investors. Will this trend ultimately lead to greater market efficiency? I consider two complicating factors. The first is crowding,the fact that, for a wide range of "unanchored" strategies, an arbitrageur cannot know how many of his peers are simultaneously entering the same trade. The second is leverage,when an arbitrageur chooses a privately optimal leverage ratio, he may create a fire-sale externality that raises the likelihood of a severe crash. In some cases, capital regulation may be helpful in dealing with the latter problem. [source]

A MODEL OF BANK CAPITAL, LENDING AND THE MACROECONOMY: BASEL I VERSUS BASEL II,

THE MANCHESTER SCHOOL, Issue 2006
LEA ZICCHINO
The revised framework for capital regulation of internationally active banks (known as Basel II) introduces risk-based capital requirements. This paper analyses the relationship between bank capital, lending and macroeconomic activity under the new capital adequacy regime. It extends a model of the bank capital channel of monetary policy,developed by Chami and Cosimano,by introducing capital constraints à la Basel II. The results suggest that bank capital is likely to be less variable under the new capital adequacy regime than under the current one, which is characterized by invariant asset risk-weights. However, bank lending is likely to be more responsive to macroeconomic shocks. [source]

Downturn Credit Portfolio Risk, Regulatory Capital and Prudential Incentives,

INTERNATIONAL REVIEW OF FINANCE, Issue 2 2010
DANIEL RÖSCH
ABSTRACT This paper analyzes the level and cyclicality of bank capital requirement in relation to (i) the model methodologies through-the-cycle and point-in-time, (ii) four distinct downturn loss rate given default concepts, and (iii) US corporate and mortgage loans. The major finding is that less accurate models may lead to a lower bank capital requirement for real estate loans. In other words, the current capital regulations may not support the development of credit portfolio risk measurement models as these would lead to higher capital requirements and hence lower lending volumes. The finding explains why risk measurement techniques in real estate lending may be less developed than in other credit risk instruments. In addition, various policy recommendations for prudential regulators are made. [source]