Bank capital buffer and risk adjustment decisions

Terhi Jokipii and Alistair Milne ()

Journal of Financial Stability, 2011, vol. 7, issue 3, 165-178

Abstract: Building an unbalanced panel of United States (US) bank holding company (BHC) and commercial bank balance-sheet data from 1986 to 2008, we examine the relationship between short-term capital buffer and portfolio risk adjustments. Our estimations indicate that the relationship over the sample period is a positive two-way relationship. Moreover, we show that the management of such adjustments is dependent on the degree of bank capitalization. Further investigation through time-varying analysis reveals a cyclical pattern in the uncovered relationship: negative after the 1991/1992 crisis, and positive before 1991 and after 1997.

Keywords: Bank; capital; Portfolio; risk; Regulation (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (131)

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Working Paper: Bank Capital Buffer and Risk Adjustment Decisions (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:7:y:2011:i:3:p:165-178

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