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Capital Adequacy In The Romanian Banking System

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  • Socol Adela

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    (1 Decembrie 1918 University of Alba Iulia)

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    Abstract

    The purpose of this paper is to studying the existing national and internationalcriteria and methodologies related to the banking capitals measurement. We examine theminimum requirements for banking capital and the actual status of Romanian banks in termsof solvency ratio. The paper analyzes the risk-based capital ratios through a case study at thelevel of a banking society from Romania. We quantify the capital charges by reference to theregulatory capital expressed as a percentage of total risk-weighted assets and by reference tothe Tier 1 capital expressed as a percentage of risk-weighted assets. Our research revealsthat the level of capitalization is relevant for the ability of banks to absorb the lossesgenerated by either exogenous shocks induced by the domestic and internationalmacroeconomic environment, or by the inappropriate management of the endogenous risksassociated with banking activity.

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    Bibliographic Info

    Article provided by Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia in its journal Annales Universitatis Apulensis Series Oeconomica.

    Volume (Year): 1 (2008)
    Issue (Month): 10 ()
    Pages: 42

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    Handle: RePEc:alu:journl:v:1:y:2008:i:10:p:42

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    Related research

    Keywords: Solvency Indicators; Adequate Banking Capitalization; Regulatory Capital;

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    1. Heid, Frank, 2007. "The cyclical effects of the Basel II capital requirements," Journal of Banking & Finance, Elsevier, vol. 31(12), pages 3885-3900, December.
    2. Kevin C. Murdock & Thomas F. Hellmann & Joseph E. Stiglitz, 2000. "Liberalization, Moral Hazard in Banking, and Prudential Regulation: Are Capital Requirements Enough?," American Economic Review, American Economic Association, vol. 90(1), pages 147-165, March.
    3. Jacques, Kevin & Nigro, Peter, 1997. "Risk-based capital, portfolio risk, and bank capital: A simultaneous equations approach," Journal of Economics and Business, Elsevier, vol. 49(6), pages 533-547.
    4. Powell, Andrew, 1989. "The Management of Risk in Developing Country Finance," Oxford Review of Economic Policy, Oxford University Press, vol. 5(4), pages 69-87, Winter.
    5. Veronica Balzarotti & Michael Falkenheim & Andrew Powell, 2002. "On the Use of Portfolio Risk Models and Capital Requirements in Emerging Markets: The Case of Argentina," World Bank Economic Review, World Bank Group, vol. 16(2), pages 197-212, August.
    6. Stoughton, Neal & Zechner, Josef, 1999. "Optimal Capital Allocation Using RAROC And EVA," CEPR Discussion Papers 2344, C.E.P.R. Discussion Papers.
    7. Homburg, Carsten & Scherpereel, Peter, 2008. "How should the cost of joint risk capital be allocated for performance measurement?," European Journal of Operational Research, Elsevier, vol. 187(1), pages 208-227, May.
    8. Con Keating & Hyun Song Shin & Charles Goodhart & Jon Danielsson, 2001. "An Academic Response to Basel II," FMG Special Papers sp130, Financial Markets Group.
    9. Peura, Samu & Jokivuolle, Esa, 2004. "Simulation based stress tests of banks' regulatory capital adequacy," Journal of Banking & Finance, Elsevier, vol. 28(8), pages 1801-1824, August.
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