The Missed Opportunity and Challenge of Capital Regulation

Anat Admati

Research Papers from Stanford University, Graduate School of Business

Abstract: Capital regulation is critical to address distortions and externalities from intense conflicts of interest in banking and from the failure of markets to counter incentives for recklessness. The approaches to capital regulation in Basel III and related proposals are based on flawed analyses of the relevant tradeoffs. The flaws in the regulations include dangerously low equity levels, complex and problematic system of risk weights that exacerbates systemic risk and adds distortions, and unnecessary reliance on poor equity substitutes. The underlying problem is a breakdown of governance and lack of accountability to the public throughout the system, including policymakers and economists.

JEL-codes: G21 G28 G32 G38 H81 K23 (search for similar items in EconPapers)
Date: 2015-12
New Economics Papers: this item is included in nep-ban, nep-cba, nep-cfn and nep-rmg
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Related works:
Journal Article: The Missed Opportunity and Challenge of Capital Regulation (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:stabus:3386

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