Benefits and Costs of Bank Capital

Author/Editor:

Jihad Dagher ; Giovanni Dell'Ariccia ; Luc Laeven ; Lev Ratnovski ; Hui Tong

Publication Date:

March 3, 2016

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: This Staff Discussion Note represents the views of the authors and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management. Staff Discussion Notes are published to elicit comments and to further debate.

Summary:

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.

Series:

Staff Discussion Notes No. 16/04

Subject:

English

Publication Date:

March 3, 2016

ISBN/ISSN:

9781498387712/

Stock No:

SDNEA2016004

Format:

Paper

Pages:

38

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