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Author: Erik F. Gerding Publisher: ISBN: Category : Languages : en Pages : 28
Book Description
This article outlines the reasons that banks and other financial institutions engage in regulatory capital arbitrage and the techniques they use to do so. Regulatory capital arbitrage describes transactions and structures that firms use to lower the effective regulatory “tax rate” of regulatory capital requirements. To the extent that these regulations force financial institutions to internalize the externalities created by their potential insolvency (including systemic risk externalities), the incentives to engage in regulatory capital arbitrage will persist. Financial institutions employ a range of complex transactions and structures, including securitization, to engage in regulatory capital arbitrage. The article briefly sketches how capital regulations and regulatory capital arbitrage have evolved in dialectical fashion. This article concludes by describing and evaluating two broad approaches to dealing with the dynamic and unstable nature of capital rules (i.e. their constant erosion by regulatory capital arbitrage): simple, broad brush rules (such as simple and large increases in regulatory capital levels) and more regulatory engineering that attempts to keep pace with the increasing complexity of financial institution balance sheets and transactions.
Author: Erik F. Gerding Publisher: ISBN: Category : Languages : en Pages : 28
Book Description
This article outlines the reasons that banks and other financial institutions engage in regulatory capital arbitrage and the techniques they use to do so. Regulatory capital arbitrage describes transactions and structures that firms use to lower the effective regulatory “tax rate” of regulatory capital requirements. To the extent that these regulations force financial institutions to internalize the externalities created by their potential insolvency (including systemic risk externalities), the incentives to engage in regulatory capital arbitrage will persist. Financial institutions employ a range of complex transactions and structures, including securitization, to engage in regulatory capital arbitrage. The article briefly sketches how capital regulations and regulatory capital arbitrage have evolved in dialectical fashion. This article concludes by describing and evaluating two broad approaches to dealing with the dynamic and unstable nature of capital rules (i.e. their constant erosion by regulatory capital arbitrage): simple, broad brush rules (such as simple and large increases in regulatory capital levels) and more regulatory engineering that attempts to keep pace with the increasing complexity of financial institution balance sheets and transactions.
Author: T. Sekine Publisher: Springer ISBN: 0230378358 Category : Business & Economics Languages : en Pages : 238
Book Description
'A work of fundamental importance. The most extensive and sophisticated reconstruction of Marx's Capital ever written takes the work of the Unoist school to new heights' - Robert Albritton, Associate Professor of Political Science, York University, Toronto Following the method advanced by Kozo Uno, this book provides an updated version of Marx's economic theory, in its full scope, as described in the three volumes of Das Kapital. It constitutes a dialectical system, consisting of the doctrines of circulation, production and distribution. The whole system defines the 'idea' (or the inner 'programme') of capitalism. More than a hundred years after Marx's death, his economic work is revived here with the analytical rigour expected of modern scientific theory, yet with no concession in substance to bourgeois economics.
Author: Thomas Sekine Publisher: BRILL ISBN: 9004384820 Category : Political Science Languages : en Pages : 870
Book Description
This book endeavours to show what capitalism logically is all about. Too much has been talked about without its real identity exposed, or even meant to be exposed.
Author: Stéphanie M. Stolz Publisher: Springer Science & Business Media ISBN: 3540485449 Category : Business & Economics Languages : en Pages : 163
Book Description
The year-long consultations on Basel II mirror the international popularity of capital requirements as a regulatory instrument. Yet, the impact of capital re quirements on banks' behavior is not fully understood. The aim of this study is to contribute to this understanding by answering the following questions: How do banks adjust capital and risk after an increase in capital requirements? How do banks adjust their regulatory capital buffer over the business cycle? And what is the impact of banks' charter value on the regulatory capital buffer? The research undertaken for this study has benefited from support in terms of ideas, research facilities, and, not least, financial funding. My thanks go first of all to Claudia M. Buch for her constant encouragement, her continuous guidance, and her confidence in my research ideas. My thanks go also to the Kiel Institute for World Economics and its staff for providing a very fertile academic ground for my research and for providing excellent research facilities. In fact, conduct ing this study would not have been possible without the support of my colleagues at the Kiel Institute and elsewhere. In particular, I am grateful to Horst Siebert for providing me the freedom to pursue this topic. My special thanks go to Jorg Breitung, Kai Carstensen, and Dieter Urban for providing input on econometric issues. I am also grateful to Andrea Schertler for the long and productive discus sions I had on various parts of this study.
Author: Ouarda Merrouche Publisher: International Monetary Fund ISBN: 1455210935 Category : Business & Economics Languages : en Pages : 37
Book Description
Using a multi-country panel of banks, we study whether better capitalized banks experienced higher stock returns during the financial crisis. We differentiate among various types of capital ratios: the Basel risk-adjusted ratio; the leverage ratio; the Tier I and Tier II ratios; and the tangible equity ratio. We find several results: (i) before the crisis, differences in capital did not have much impact on stock returns; (ii) during the crisis, a stronger capital position was associated with better stock market performance, most markedly for larger banks; (iii) the relationship between stock returns and capital is stronger when capital is measured by the leverage ratio rather than the risk-adjusted capital ratio; (iv) higher quality forms of capital, such as Tier 1 capital and tangible common equity, were more relevant.
Author: Hrishikes Bhattacharya Publisher: ISBN: Category : Languages : en Pages : 58
Book Description
There is a deep-rooted mistrust that left to them; banks will default on depositors' payment and lending commitment, which will create panic leading to runs that may damage the socio-economic fabric of a society. Hence, banks are kept under strict regulation; the latest plank in the regulatory architecture is the capital adequacy requirement. The most important rule of market economy is that capital moves to an industry and finds its own level in terms of the risk-return structure of that industry. Historical decline of capital-assets ratio of US banks, till various forms of capital regulation came into place, should be explained within the framework of risk-return behaviour of equity capital. As against contemporary belief, the fall is found to be due to rise in riskiness of banking, increase in bank assets propelled by increasing rate of return and consequent rise in ROE. Any interference with the market laws by regulatory arbitrariness would prevent the capital from exploiting fully its risk-return capacity. This will lower down the productivity of capital with adverse consequences for the economy, not to speak of depositors' protection. Risk management in banks is typically a strategic issue while movement and level of equity capital are embedded in economic laws. A bank regulator, as an economic strategist, is required to see that these laws are not impinged upon. The regulator should, therefore, abandon the capital regulation; instead it should focus on value maintenance. For this, the regulator needs only to specify and ensure that at any time the gross rate payable on deposit liability is less than either the net rate of return receivable on risk-assets or the rate available from risk-free-assets.
Author: Erik F. Gerding
Author: Erik F. Gerding
Author: T. Sekine
Author: Thomas Sekine
Author: Stéphanie M. Stolz
Author: Ouarda Merrouche
Author: Longmei Zhang
Author: Benjamin Wolkowitz
Author: Stéphanie Stolz
Author: Anthony M. Santomero
Author: Hrishikes Bhattacharya