izpis_h1_title_alt

Capital regulation and banks' financial decisions
Zhu, Haibin (Author)

URLURL - Presentation file, Visit http://www.bis.org/publ/work232.pdf This link opens in a new window

Abstract
This paper develops a stochastic dynamic model to examine the impact of capital regulation on banks' financial decisions. In equilibrium, lending decisions, capital buffer and the probability of bank failure are endogenouslydetermined. Compared to a flat-rate capital rule, a risk-sensitivecapital standard causes the capital requirement to be much higher for small (and riskier) banks and much lower for large (and less risky)banks. Nevertheless, changes in actual capital holdings are less pronounced due to the offsetting effect of capital buffers. Moreover, the non-binding capital constraint in equilibrium implies that banks adopt an active portfolio strategy and hence the counter-cyclical movement of risk-based capital requirements does not necessarily lead to a reinforcement of the credit cycle. In fact, the results from the calibrated model show that the impact on cyclical lending behavior differs substantially across banks. Lastly, the analysis suggests that the adoption of a more risk-sensitive capital regime can be welfare-improving from a regulator's perspective, in that it causes less distortion in loan decisions and achieves a better balance between safety and efficiency.

Language:English
Keywords:bančništvo, banke, kapital, standardi, regulacija, odločanje, modeli, banking, banks, capital, standards, regulation, decision making, models
Work type:Not categorized (r6)
Organization:EF - Faculty of Economics
Year:2007
Publisher:Bank for International Settlements, Monetary and Economic Department
Number of pages:43 str.
Place:Basel
UDC:336.71
COBISS.SI-ID:17261542 Link is opened in a new window
Views:554
Downloads:186
Metadata:XML RDF-CHPDL DC-XML DC-RDF
 
Average score:(0 votes)
Your score:Voting is allowed only to logged in users.
:
Share:AddThis
AddThis uses cookies that require your consent. Edit consent...

Similar documents

Similar works from RUL:
Similar works from other Slovenian collections:

Comments

Leave comment

You have to log in to leave a comment.

Comments (0)
0 - 0 / 0
 
There are no comments!

Back