Auditing and Bank Capital Regulation
Edward Simpson Prescott
Working Papers from CEMFI
Auditing is introduced into a model of bank capital regulation. Deterministic and stochastic auditing strategies are studied. Contrary to intuition, auditing of bank risk should be focused on the safest banks because they hold the least amount of capital. Risky banks, which hold more capital, need to be audited less. The importance of auditing by regulators and penalties for non-compliance are discussed in light of the Basel II capital regulation proposals. Emphasis is placed on the importance of supervisory review - Pillar Two of Basel II - of the accuracy of banks' reports on the risk of their assets.
New Economics Papers: this item is included in nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cmf:wpaper:wp2004_0412
Access Statistics for this paper
More papers in Working Papers from CEMFI Contact information at EDIRC.
Bibliographic data for series maintained by Araceli Requerey ().