The simultaneous equations model is appropriate in case of a simultaneity bias between bank lending and bank capital
. The system of structural equations is:
It may be supposed that bank capital
regulation prevents banks from refinancing poor projects and hardens the budget constraints of firms.
Lower levels of bank capital
also impose costs on society as a whole by increasing the risk of failure.
However, he added that, ''ultimately, it is not about which funding is cheaper, the fact is that the banks have significantly raised the core Tier 1 capital in one fell swoop, such that they will not need to go to the equity markets for bank capital
for a long while more.''
Empirical evidence on several Western European banks suggest a countercyclical relationship between bank capital
buffers and the business cycle (Ayuso et al., 2004; Lindquist, 2004; Jopikii and Milne, 2008; Stolz and Wedow, 2011).
will be one of the most useful tools that regulators can use to avoid deep financial crises.
An analysis of bank capital
in the paper shows that banks adjusted their capital ratios according to the risks that they were taking and that they were well capitalised.
TheaS&D group continues to defend the possibility of differentiating between requirements for bank capital
using the amount registered on the balance sheet.
TOKYO - Japan's Financial Services Agency Commissioner Takafumi Sato on Wednesday warned against excessive bank capital
regulations as a way to prevent more global financial crisis.
The implementation of these regulations, along with other factors, has often been blamed for a perceived credit crunch in the United States immediately prior to and during the 1990-91 recession, giving rise to the term "capital crunch." (1) Research on this and other episodes has found that low bank capital
is associated with sluggish lending.
The banking systems were in poor shape despite the fact that most of them were among the more than 100 nations which had formally accepted the 1988 Bank Capital
Accord promulgated by the Basel Committee on Banking Supervision.
It simply is not in the interest of the consolidated banking organization to increase bank dividend flows beyond parent company capital-servicing cash flow needs because the resultant decline in bank capital
would increase funding costs of the bank.