Bank capital adequacy framework

Faidon Kalfaoglou ()
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Faidon Kalfaoglou: Bank of Greece

Economic Bulletin, 2012, issue 36, 43-81

Abstract: The debt crisis in Greece and the resulting haircut on sovereign bonds (known as PSI) adversely affected bank capital and resulted in state funds being required to recapitalize the banks. During that process, several questions arose about the meaning of capital adequacy in banks. This paper considers the question from a non-technical point of view and surveys the regulatory requirements for capital adequacy contained in the so-called Basel framework. It analyses all contributing parts of the Capital Adequacy Ratio (CAR), including regulatory capital, credit risk, market risk and operational risk, raising in each case the concerns of the literature as well as recent contributions. For the reader’s convenience, the more technical aspects are presented in boxes and annexes.

Keywords: capital adequacy; regulatory capital; credit risk; market risk; operational risk (search for similar items in EconPapers)
JEL-codes: G28 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (24)

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