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Restoring Banking Stability: Beyond Supervised Capital Requirements

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  • Gerard Caprio
  • Patrick Honohan

Abstract

Emerging economies have been particularly prone to financial sector crises, reflecting marked information asymmetries and political interference, as well as the substantial volatility in underlying economic conditions, and the vulnerability of banking and finance when structural economic changes create a new and uncharted operating environment. The standard regulatory paradigm relies mainly on supervised capital adequacy, but it may not be enough. Other measures to improve the incentive structure for bankers, regulators, and other market participants could effectively increase the number of concerned, skilled and watchful eyes. Intermittent application of supplementary "blunt instruments" could also be useful.

Suggested Citation

  • Gerard Caprio & Patrick Honohan, 1999. "Restoring Banking Stability: Beyond Supervised Capital Requirements," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 43-64, Fall.
    • Handle: RePEc:aea:jecper:v:13:y:1999:i:4:p:43-64
    Note: DOI: 10.1257/jep.13.4.43
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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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