scholarly journals Optimal Capital Requirements over the Business and Financial Cycles

2020 ◽  
Vol 12 (3) ◽  
pp. 139-174 ◽  
Author(s):  
Frederic Malherbe
Keyword(s):  
Banking Sector ◽  
Returns To Scale ◽  
Capital Requirements ◽  
Capital Requirement ◽  
Investment Efficiency ◽  
Bank Capital ◽  
The Social ◽  
Optimal Capital ◽  
Bank Capital Requirement ◽  
Lending Decisions

I study economies where banks do not fully internalize the social costs of their lending decisions, which leads to real overinvestment. The bank capital requirement that restores investment efficiency varies over time. During booms, more investment is desirable, so the banking sector must be allowed to expand. This suggests a loosening of the requirement. However, there is also more bank capital. Since the banking sector exhibits decreasing returns to scale, this suggests a tightening instead. I find that the latter effect, which I dub the “bank capital channel,” dominates: the optimal capital requirement is tighter during booms than in recessions. (JEL E32, E44, G21, G28, G32)

Statistical Models for Operational Risk

2011 ◽  
pp. 1848-1853
Author(s):  
Concetto Elvio Bonafede
Keyword(s):  
Statistical Models ◽  
Banking Sector ◽  
Financial Risks ◽  
Bank Capital ◽  
Basel Committee ◽  
Operational Risks ◽  
Credit Risks ◽  
New Basel Capital Accord ◽  
Bank Capital Requirement ◽  
Principal Elements

A statistical model is a possible representation (not necessarily complex) of a situation of the real world. Models are useful to give a good knowledge of the principal elements of the examined situation and so to make previsions or to control such a situation. In the banking sector, models, techniques and regulations have been developed for evaluating Market and Credit risks, for linking together risks, capital and profit opportunity. The regulations and vigilance standards on the capital have been developed from the Basel Committee founded at the end of 1974 by the G10. The standards for the capital’s measurement system were defined in 1988 with the “Capital Accord” (BIS, 1988); nowadays, it is supported from over 150 countries around the world. In January 2001 the Basel Committee published the document “The New Basel Capital Accord” (BIS, 2001), which is a consultative document to define the new regulation for the bank capital requirement. Such a document has been revisited many times (see BIS, 2005). With the new accord there is the necessity of appraising and managing, beyond the financial risks, also the category of the operational risks (OR) already responsible of losses and bankruptcies (Cruz (Ed.), 2004; Alexander (Ed.), 2003; Cruz, 2002).

Bank Capital Requirements after the Financial Crisis

2019 ◽  
pp. 706-735
Author(s):  
Mark E. Van Der Weide ◽  
Jeffrey Y. Zhang
Keyword(s):  
Financial Crisis ◽  
Structural Changes ◽  
Banking Sector ◽  
Balance Sheet ◽  
Banking System ◽  
Capital Requirements ◽  
Bank Capital ◽  
Regulatory Capital ◽  
Stress Tests ◽  
Global Banking

Regulators responded with an array of strategies to shore up weaknesses exposed by the 2008 financial crisis. This chapter focuses on reforms to bank capital regulation. We first discuss the ways in which the post-crisis Basel III reforms recalibrated the existing framework by improving the quality of capital, increasing the quantity of capital, and improving the calculation of risk weights. We then shift to the major structural changes in the regulatory capital framework—capital buffers on top of the minimum requirements; a leverage ratio that explicitly accounts for off-balance-sheet exposures; risk-based and leverage capital surcharges on the largest banks; bail-in debt to facilitate orderly resolution; and forward-looking stress tests. We conclude with a quantitative assessment of the evolution of capital in the global banking system and in the US banking sector.

scholarly journals Bank risk and performance in an emerging market setting: the case of Bangladesh

2018 ◽  
Vol 23 (46) ◽  
pp. 199-229
Author(s):  
Md. Tofael Hossain Majumder ◽  
Xiaojing Li
Keyword(s):  
Banking Sector ◽  
Emerging Market ◽  
Capital Requirements ◽  
Policy Implications ◽  
Bank Capital ◽  
Content Type ◽  
Generalized Methods Of Moments ◽  
And Performance ◽  
One Year ◽  
Bank Capital Requirements

PurposeThis study aims to investigate the impacts of bank capital requirements on the performance and risk of the emerging economy, i.e. Bangladeshi banking sector.Design/methodology/approachThe study applies an unbalanced panel data which comprises 30 banks yielding a total of 413 bank-year observations over the period 2000 to 2015.FindingsUsing generalized methods of moments, the empirical results of this research reveal that bank capital is positively and significantly impressive on bank performance, whereas negatively and significantly impact on risk. The study also finds the inverse relationship between risk and performance in both the performance and risk equations. The results also indicate that there is a persistence of performance and risk from one year to the next year.Originality/valueThis is the unique investigation on Bangladeshi bank industry that considers the simultaneous effect of bank capital requirements on risk and performance. Therefore, it is predicted that the empirical evidence of this research shows policy implications to the regulatory authority of Bangladeshi banking industry to determine relevant policies.

Part I The Elements of Bank Financial Supervision, 5 Bank Capital Requirements

2018 ◽  
Author(s):  
Gleeson Simon
Keyword(s):  
Stress Testing ◽  
Stress Test ◽  
Capital Requirements ◽  
Financial Supervision ◽  
Capital Requirement ◽  
Bank Capital ◽  
Leverage Ratio ◽  
The Third ◽  
The World ◽  
Probable State

This chapter begins by discussing the three overlapping capital requirements that banks are subject to. The first is the orthodox Basel capital requirement. The second is the Leverage Ratio, which is simply a non-risk-weighted capital requirement. The third is the stress test requirement. This has historically been the largest of the three. Stress testing identifies a particular probable state of the world, estimates the total loss which would occur if that state of the world were to eventuate, and requires capital sufficient to ensure that the bank retains sufficient capital after suffering the projected losses. The remainder of the chapter covers Pillar 2 assessment, capital floor, and capital buffers.

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