Centrality-Based Capital Allocations

Adrian Alter, Ben R. Craig and Peter Raupach ()
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Ben R. Craig: Deutsche Bundesbank, Federal Reserve Bank of Cleveland

International Journal of Central Banking, 2015, vol. 11, issue 3, 329-377

Abstract: We look at the effect of capital rules on a banking system that is connected through correlated credit exposures and interbank lending. Keeping total capital in the system constant, the reallocation rules, which combine individual bank characteristics and interconnectivity measures of interbank lending, are to minimize a measure of system-wide losses. Using the detailed German credit register for estimation, we find that capital rules based on eigenvectors dominate any other centrality measure, saving about 15 percent in expected bankruptcy costs.

JEL-codes: C15 C81 G21 G28 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (19)

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Related works:
Working Paper: Centrality-based Capital Allocations (2015)
Working Paper: Centrality-based Capital Allocations (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ijc:ijcjou:y:2015:q:3:a:8

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