How much capital should banks hold?

Caterina Mendicino, Kalin Nikolov, Juan-Rubio Ramirez, Javier Suarez and Dominik Supera

Research Bulletin, 2021, vol. 80

Abstract: Episodes such as the current coronavirus (COVID-19) crisis might lead to a significant rise in borrower defaults and, consequently, weakness in the banking sector. Having well-capitalised banks makes the financial system more resilient to such episodes. We assess how much capital would be optimal for banks to hold, taking into consideration the risk of banking crises driven by borrower defaults (which we term “twin default crises”). JEL Classification: G01, G28

Keywords: Bank capital requirements; Banking crises (search for similar items in EconPapers)
Date: 2021-01
Note: 1774743
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