In September 2009, G20 representatives called for introducing a minimum leverage ratio as an instrument of financial regulation. It is supposed to assure a certain degree of core capital for banks, independent of the controversial procedures used to assess risk. This paper discusses the...

Business cycles imply liquidity risks for banks. This paper explores how these risks influence bank lending over the cycle. With forward-looking banks, lending cycles, credit booms and busts, or suppressed and highly fragile bank systems can emerge, depending on the magnitude of liquidity risks....

We analyze the relationship between bank size and risk-taking under the New Basel Capital Accord. Using a model with imperfect competition and moral hazard, we show that the introduction of an internal ratings based (IRB) approach improves upon flat capital requirements if the approach is...

This paper examines the issues surrounding the implementation of global regulatory reforms - spearheaded by the G20 and mainly under the aegis of the Financial Stability Board (FSB) - in Brunei Darussalam, Cambodia, the Lao People's Democratic Republic (Lao PDR), Myanmar, and Viet Nam (BCLMV)....

Trotz eines Konsolidierungsprozesses ist die Bankendichte in Deutschland hoch. Mitte der 2000er Jahre suchten die deutschen Banken nach Renditen im Ausland und waren daher von der Finanzkrise stärker als Banken anderer Euroländer betroffen. Die Europäische Kommission forderte daraufhin vor...

The industrial organization approach to banking is extended to analyze the effects of interbank market activity and regulatory liquidity requirements on bank behavior. A multi-stage decision situation allows for considering the interaction between credit risk and liquidity risk of banks. This...

Several countries have recently introduced national capital standards exceeding the internationally coordinated Basel III rules, thus suggesting a "race to the top" in capital standards. We study regulatory competition when banks are heterogeneous and give loans to firms that produce output in...

In response to the global financial crisis of 2007-2009, risk-based capital requirements have been reinforced in the new Basel III Accord to counter excessive bank risk-taking behavior. However, prior theoretical as well as empirical literature that studies the impact of risk-based capital...

The current standardized approach for assessing credit risk under Basel III depends on ratings assigned by credit rating agencies (CRAs). However, this approach presents three problems. First, the definitions of ratings used by CRAs to assess the likelihood of default and recovery rates are not...

Capital buffer is the excess of capital that banks have above the legally prescribed minimum and has a very important role for preserving the stability of the banking sector, especially in economies where banks are the main source of funding. The capital buffer of banks is very important to...