Risk-Based Capital Adequacy of Australian Banks

Warren Hogan and Ian G. Sharpe
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Ian G. Sharpe: School of Banking and Finance, University of New South Wales, Kensington.

Australian Journal of Management, 1990, vol. 15, issue 1, 177-201

Abstract: This paper analyses the capital adequacy provisions introduced by the Reserve Bank of Australia from September, 1988 and examines its initial application to three major Australian banks. This risk-adjusted capital adequacy ratio is partial in its coverage and thus a misleading measure of total bank risk. As well, it may distort the allocation of credit. An alternative approach based on option pricing theory is considered.

Keywords: CAPITAL ADEQUACY; REGULATION; CREDIT ALLOCATION; RISK WEIGHTINGS; RISK ADJUSTMENT (search for similar items in EconPapers)
Date: 1990
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Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:15:y:1990:i:1:p:177-201

DOI: 10.1177/031289629001500108

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