The 1988 Basel I Accord set the common requirements of bank capital to promote the soundness and stability of the international banking system. The agreement required banks to hold capital in proportion to their perceived credit risks, and this requirement may have caused a “credit crunch,”...

This paper studies the impact of bank regulation and taxation in a dynamic model with banks exposed to credit and liquidity risk. We find an inverted U-shaped relationship between capital requirements and bank lending, efficiency, and welfare, with their benefits turning into costs beyond a...

The paper finds that, given New Zealand’s conservative approach in implementing the Basel II framework, New Zealand banks’ headline capital ratios underestimate their capital strength. A comparison with Canadian, UK and Australian banks highlights the impact of New Zealand’s...

Credibility is the bedrock of any crisis stress test. The use of stress tests to manage systemic risk was introduced by the U.S. authorities in 2009 in the form of the Supervisory Capital Assessment Program. Since then, supervisory authorities in other jurisdictions have also conducted similar...

There has recently been a proliferation of new quantitative tools as part of various initiatives to improve the monitoring of systemic risk. The "SysMo" project takes stock of the current toolkit used at the IMF for this purpose. It offers detailed and practical guidance on the use of current...

This paper explores whether corporate tax bias toward debt finance differs between banks and nonbanks, using a large panel of micro data. On average, it finds that there is no significant difference. The marginal tax effect for both banks and non-banks is close to 0.2. However, the...

This paper proposes and demonstrates a methodology for modeling correlated systemic solvency and liquidity risks for a banking system. Using a forward looking simulation of many risk factors applied to detailed balance sheets for a 10 bank stylized United States banking system, we analyze...

This paper discusses key findings of the Financial System Stability Assessment on Banking Supervision, Insurance Supervison, Securities Regulation, and Anti-Money Laundering and Combating the Financing of Terrorism for Greece. The Greek financial sector appears largely sound and resilient to...

This paper assesses Serbia and Montenegro’s First Review Under the Extended Arrangement (EA). Serbia and Montenegro’s economic and policy performance has remained good under the current EA, but daunting challenges lie ahead. Macroeconomic policies need to be carefully calibrated to...

This paper discusses Serbia and Montenegro’s Sixth Review Under the Extended Arrangement, Financing Assurances Review, Request for Waivers of Nonobservance of Performance Criteria, and Proposed Post-Program Monitoring. Program implementation since the fifth review has been mixed, delaying...