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Rebalancing the three pillars of Basel II

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  • Jean-Charles Rochet

Abstract

The author observes that the three pillars of Basel II seem uneven: Pillars 1 and 2 have eclipsed Pillar 3 - market discipline and disclosure - in the Basle Committee's deliberations. He works through a banking model of the three Pillars, shows how the optimal liquidation limit varies with bank liability structure and the regulatory regime, and argues that market discipline, via mandatory subordinated debt issuance, can reduce forbearance by supervisors.

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File URL: http://www.newyorkfed.org/research/epr/04v10n2/0409roch.pdf
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Bibliographic Info

Article provided by Federal Reserve Bank of New York in its journal Economic Policy Review.

Volume (Year): (2004)
Issue (Month): Sep ()
Pages: 7-21

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Handle: RePEc:fip:fednep:y:2004:i:sep:p:7-21:n:v.10no.2

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Keywords: Bank supervision ; Bank capital ; Banking law;

References

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Citations

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Cited by:
  1. Koziol, Christian & Lawrenz, Jochen, 2012. "Contingent convertibles. Solving or seeding the next banking crisis?," Journal of Banking & Finance, Elsevier, vol. 36(1), pages 90-104.
  2. Mohamed Belhaj & Nataliya Klimenko, 2012. "Optimal Preventive Bank Supervision Combining Random Audits and Continuous Intervention," AMSE Working Papers 1201, Aix-Marseille School of Economics, Marseille, France.
  3. François Meunier, 2008. "Crise des marchés de dette ? Caveat emptor !," Revue d'Économie Financière, Programme National Persée, vol. 7(1), pages 243-249.
  4. Tsai, Jeng-Yan, 2013. "Optimal bank interest margins under capital regulation in a call-option utility framework," Economic Modelling, Elsevier, vol. 31(C), pages 557-565.
  5. Philip Bond & Itay Goldstein & Edward S. Prescott, 2006. "Market-based regulation and the informational content of prices," Working Paper 06-12, Federal Reserve Bank of Richmond.
  6. Donald P. Morgan & Kevin J. Stiroh, 2005. "Too big to fail after all these years," Staff Reports 220, Federal Reserve Bank of New York.
  7. Elisabetta Montanaro, 2013. "Regole di Basilea e modelli di vigilanza: quale convergenza? (Basel rules and supervisory models: What convergence?)," Moneta e Credito, Economia civile, vol. 66(264), pages 415-442.
  8. Lassaâd Mbarek & Dorra Mezzez Hmaied, 2012. "Bank informational opacity: evidence from the Tunisian stock market," Journal of Financial Regulation and Compliance, Emerald Group Publishing, vol. 20(3), pages 278-292, July.
  9. Jijun Niu, 2008. "Bank Competition, Risk, and Subordinated Debt," Journal of Financial Services Research, Springer, vol. 33(1), pages 37-56, February.
  10. Polo, Andrea, 2007. "Corporate governance of banks: the current state of the debate," MPRA Paper 2325, University Library of Munich, Germany.

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