Banks’ buffer capital: How important is risk (Paper presented at Basel Committee/Banca d'Italia workshop, 20-21 March 2003)
ثبت نشده
چکیده
Most banks hold a capital to asset ratio well above the required minimum level defined by the present capital adequacy regulation (Basel I). Using bank-level panel data from Norway, important hypotheses concerning the determination of the buffer capital is tested. Focus is particularly on the importance of: (i) the buffer as an insurance, (ii) portfolio risk, (iii) the competition effect, (iv) regulatory monitoring, and (v) economic growth. The results imply that buffer capital is used both as an insurance against failure to meet the capital requirement and a competition parameter. A negative risk effect suggests that moral hazard is present, but increased regulatory scrutiny increases the buffer capital of commercial banks. The buffer capital of commercial banks behaves counter-cyclically.
منابع مشابه
Asset Correlation of German Corporate Obligors: Its Estimation, Its Drivers and Implications for Regulatory Capital (Paper presented at Basel Committee/Banca d'Italia workshop, 20-21 March 2003)
This paper addresses the gap between the theoretically well-understood impact of systematic risk on the loss-distribution of a credit-risky loan portfolio and the lack of empirical estimates of the default correlation. To this purpose we start with a one-factor model in which the correlation with the systematic risk factor equals the asset correlation between two firms. In the theoretical part ...
متن کاملThe Risk-weights in the New Basel Capital Accord: Lessons from Bond Spreads Based on a Simple Structural Model
* This paper has been presented at a European Central Bank workshop with the Chairman and Secretaries of the Working Group on Banking Developments, as well at a workshop at the Bank of Italy's Research Department: we are grateful to seminar participants, as well as to Mark Carey and Reint Gropp for their useful comments. Finally, we are particularly grateful to George Pennacchi for his precious...
متن کاملThe impact of the 1988 Basel Accord on banks ’ capital ratios and credit risk - taking : an international study 1
The purpose of this paper is to see whether and how G-10 banks have complied with the 1988 Basel Capital Accord. The interest of this study lies in the fact that the standardized approach of the New Basel Accord is similar to the 1988 agreement. However, very little is known about the reaction of non-US banks to the imposition of fixed minimum capital requirements. Building on previous studies,...
متن کاملThe Effects of Too-Big-to-fail Banks on Depositors' Behavior
In the wake of recent financial crisis, large banks have been considered as important factors in financial markets in the world, since these bankschr(chr('39')39chr('39')) failure could affect the whole economy by extending systemic risk. With regard to this issue, when large banks face insolvency or bankruptcy, larger part of economy would be affected, and with the interconnectedness between b...
متن کاملSector concentration risk: A model for estimating capital requirements
The 2004 Basel Committee on Banking Supervision Accord (known as Basel II) provides a common framework for banks when determining their minimum capital requirements for solvency purposes. For credit risk (the most important one for banks activity) Basel II uses an asymptotic single risk factor (ASRF) model and, as we demonstrate in the paper, assumes two fundamental hypotheses: Firstly, there i...
متن کامل