[PDF] Benefits And Costs Of Bank Capital eBook

Author : Jihad Dagher
Publisher : International Monetary Fund
Page : 38 pages
File Size : 47,13 MB
Release : 2016-03-03
Category : Business & Economics
ISBN : 1498387713

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The appropriate level of bank capital and, more generally, a bank’s capacity to absorb losses, has been at the core of the post-crisis policy debate. This paper contributes to the debate by focusing on how much capital would have been needed to avoid imposing losses on bank creditors or resorting to public recapitalizations of banks in past banking crises. The paper also looks at the welfare costs of tighter capital regulation by reviewing the evidence on its potential impact on bank credit and lending rates. Its findings broadly support the range of loss absorbency suggested by the Financial Stability Board (FSB) and the Basel Committee for systemically important banks.

Author : Jihad Dagher
Publisher :
Page : 38 pages
File Size : 43,81 MB
Release : 2016
Category : Bank capital
ISBN : 9781513538525

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The appropriate level of bank capital and, more generally, a bank’s capacity to absorb losses, has been at the core of the post-crisis policy debate. This paper contributes to the debate by focusing on how much capital would have been needed to avoid imposing losses on bank creditors or resorting to public recapitalizations of banks in past banking crises. The paper also looks at the welfare costs of tighter capital regulation by reviewing the evidence on its potential impact on bank credit and lending rates. Its findings broadly support the range of loss absorbency suggested by the Financial Stability Board (FSB) and the Basel Committee for systemically important banks.

Author : Simon Firestone
Publisher :
Page : 0 pages
File Size : 26,75 MB
Release : 2017
Category :
ISBN :

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We evaluate the economic costs and benefits for bank capital levels in the United States. The framework and analysis is similar to that found in previous studies though we tailor the analysis to the specific features and experience of the U.S. financial system and account for the impact of new financial regulations. The conceptual framework identifies the benefits of bank capital with a lower probability of financial crises, which result in decreased economic output. The costs of bank capital are identified with increases in banks cost of funding, which are passed along to borrowers and result in a lower level of economic output. Optimal capital maximize the difference between benefits and costs or net benefits. Using a range of empirical estimates of net benefits we find that the optimal level of bank capital in the United States ranges from just over 13 percent to over 26 percent.

Author : Mohamed Belkhir
Publisher : International Monetary Fund
Page : 44 pages
File Size : 35,77 MB
Release : 2019-12-04
Category : Business & Economics
ISBN : 1513519808

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Using a sample of publicly listed banks from 62 countries over the 1991-2017 period, we investigate the impact of capital on banks’ cost of equity. Consistent with the theoretical prediction that more equity in the capital mix leads to a fall in firms’ costs of equity, we find that better capitalized banks enjoy lower equity costs. Our baseline estimations indicate that a 1 percentage point increase in a bank’s equity-to-assets ratio lowers its cost of equity by about 18 basis points. Our results also suggest that the form of capital that investors value the most is sheer equity capital; other forms of capital, such as Tier 2 regulatory capital, are less (or not at all) valued by investors. Additionally, our main finding that capital has a negative effect on banks’ cost of equity holds in both developed and developing countries. The results of this paper provide the missing evidence in the debate on the effects of higher capital requirements on banks’ funding costs.

Author : Mr.Peter Stella
Publisher : International Monetary Fund
Page : 40 pages
File Size : 14,73 MB
Release : 1997-07-01
Category : Business & Economics
ISBN : 1451850506

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Central banks may operate perfectly well without capital as conventionally defined. A large negative net worth, however, is likely to compromise central bank independence and interfere with its ability to attain policy objectives. If society values an independent central bank capable of effectively implementing monetary policy, recapitalization may become essential. Proper accounting practice in determining central bank profit or loss and rules governing the transfer of the central bank’s operating result to the treasury are also important. A variety of country-specific central bank practices are reviewed to support the argument.

Author : William R. Cline
Publisher : Policy Analyses in International Economics
Page : 241 pages
File Size : 24,22 MB
Release : 2017
Category : Asset requirements
ISBN : 9780881327212

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William R. Cline analyzes whether reforms of capital requirements for banks have gone far enough. He calculates how much higher bank capital reduces the risk of banking crises. This study also challenges the recent "too much finance" literature, which holds that in advanced countries banking sectors are already too large and are curbing growth.

Author : Gianni De Nicolo
Publisher :
Page : 15 pages
File Size : 30,91 MB
Release : 2018
Category :
ISBN :

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This paper presents empirical evidence on the impact of changes in capital requirements on bank lending, and delivers estimates of their costs and benefits in terms of foregone real GDP growth. The empirical analysis is based on large international datasets at a firm and country level, including data of the 2007-2009 crisis and beyond. I find that an increase in regulatory capital ratios reduces real GDP growth, with this reduction offsetting its benefits in terms of a reduced probability of a banking crisis. This evidence suggests that the net benefits of an increase in capital requirements may be negligible.