This paper considers characteristics of the capital requirements proposed in The New Basel Capital Accord (2001). Formal analysis identifies calibration features that could give rise to unintended consequences that may include: concentration of credit risk in institutions that are less well...

Prompt Corrective Action (PCA) requires regulators to sanction banks before they become insolvent and to resolve institutions within 90 days of reaching critically undercapitalized status. Forensic studies of the financial crisis conclude that the PCA process not only failed to rehabilitate...