Rollover and Capital Adequacy Requirements

Yukihiro Yasuda and 行宏 安田

No G-1-11, Working Paper Series from Hitotsubashi University Center for Financial Research

Abstract: This paper shows theoretically that if bank supervision is weak, capital adequacy requirements provide an incentive for troubled banks with their non-performing loans to refinance their client distressed firms, even those with poor prospects. We also argue that in some cases rollover is desirable because the bank can resolve the debt overhang problem of its clients. Therefore, results such as these indicate that loan rollovers need to be assessed more carefully.

Keywords: Rollover; Capital adequacy requirements; Debt overhang (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Pages: 8 pages
Date: 2016-05
New Economics Papers: this item is included in nep-ban, nep-cba, nep-cfn and nep-rmg
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https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/27917/070hcfrWP_1_011.pdf

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Persistent link: https://EconPapers.repec.org/RePEc:hit:hcfrwp:g-1-11

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