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Reconsidering bank capital regulation: a new combination of rules, regulators, and market discipline

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  • Connel Fullenkamp
  • Céline Rochon

Abstract

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 revised 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 regulatory capital, 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.

Suggested Citation

  • Connel Fullenkamp & Céline Rochon, 2017. "Reconsidering bank capital regulation: a new combination of rules, regulators, and market discipline," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 20(4), pages 343-359, October.
    • Handle: RePEc:taf:jecprf:v:20:y:2017:i:4:p:343-359
    DOI: 10.1080/17487870.2016.1181550
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    Cited by:

    1. Ahmed Imran Hunjra & Qasim Zureigat & Rashid Mehmood, 2020. "Impact of Capital Regulation and Market Discipline on Capital Ratio Selection: A Cross Country Study," IJFS, MDPI, vol. 8(2), pages 1-13, April.
    2. Joshua Long, 2021. "Crisis Capitalism and Climate Finance: The Framing, Monetizing, and Orchestration of Resilience-Amidst-Crisis," Politics and Governance, Cogitatio Press, vol. 9(2), pages 51-63.

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