In a model with bankruptcy costs and segmented deposit and equity markets, we endogenize the cost of equity and deposit finance for banks. Despite risk neutrality, equity capital earns a higher expected return than direct investment in risky assets. Banks hold positive capital to reduce...

This paper gives an overview of the capital requirements for banks. Regulatory capital is analyzed, followed by the discussion of economic capital. These ideas are used to explain risk adjusted performance measures. -- Regulatorisches Kapital ; ökonomisches Kapital ; RAROC ; RORAC