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This paper studies how capital requirements influence a bank’s mode of entry into foreign financial markets. We develop a model of an internationally operating bank that creates and allocates liquidity across countries and argue that the advantage of multinational banking over offering...
Persistent link: https://www.econbiz.de/10005426797
This paper provides an explanation for the observation that banks hold on average a capital ratio in excess of regulatory requirements. We use a functional approach to banking based on Diamond and Rajan (2001) to demonstrate that banks can use capital ratios as a strategic tool for renegotiating...
Persistent link: https://www.econbiz.de/10005232591