Benefits and Costs of Bank Capital
Giovanni Dell'ariccia (),
Luc Laeven (),
Lev Ratnovski () and
Hui Tong ()
No 2016/004, IMF Staff Discussion Notes from International Monetary Fund
The appropriate level of bank capital and, more generally, a bank’s capacity to absorb losses, has been at the core of the post-crisis policy debate. This paper contributes to the debate by focusing on how much capital would have been needed to avoid imposing losses on bank creditors or resorting to public recapitalizations of banks in past banking crises. The paper also looks at the welfare costs of tighter capital regulation by reviewing the evidence on its potential impact on bank credit and lending rates. Its findings broadly support the range of loss absorbency suggested by the Financial Stability Board (FSB) and the Basel Committee for systemically important banks.
Keywords: Banking; Capital adequacy requirements; Banking crises; Bank credit; Financial crises; SDN,bank capital,capital requirement,bank creditor,crisis bank recapitalization,bank leverage,bank loss,recapitalization injection (search for similar items in EconPapers)
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