Reconsidering Bank Capital Regulation: A New Combination of Rules, Regulators, and Market Discipline
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Summary:
Despite revisions to bank capital standards, fundamental shortcomings remain: the rules for setting capital requirements need to be simpler, and resolution should be an essential part of the capital requirement framework.We propose a new system of capital regulation that addresses these needs by making changes to all three pillars of bank regulation: only common equity should be recognized as capital for regulatory purposes, and risk weighting of assets should be abandoned; capital requirements should be assigned on an institution-by-institution basis according to a regulatory (s,S) approach developed in the paper; a standard for prompt, corrective action is incorporated into the (s,S) approach.
Series:
Working Paper No. 2014/169
Subject:
Bank regulation Bank resolution Banking Basel Core Principles Capital adequacy requirements Financial crises Financial regulation and supervision
English
Publication Date:
September 15, 2014
ISBN/ISSN:
9781498382472/1018-5941
Stock No:
WPIEA2014169
Pages:
36
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