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Concurrent Capital Buffers in a Banking Group

In: CNB Financial Stability Report 2013/2014

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  • Michal Skorepa

Abstract

In this article we simulate how much the capital of a parent bank must be increased above the minimum capital requirement applying to the parent alone as a result of a requirement being imposed on the banking group as a whole, and how the probability of failure of a subsidiary and the group changes after a capital buffer is imposed on the group as a whole and/or the subsidiary. The simulation takes into account the relative sizes of the parent and the subsidiary, the parent’s share in the subsidiary, the similarity between the business models of the parent and the subsidiary, and the preparedness of the parent to support the subsidiary if the latter is in danger of failing.

Suggested Citation

  • Michal Skorepa, 2014. "Concurrent Capital Buffers in a Banking Group," Occasional Publications - Chapters in Edited Volumes, in: CNB Financial Stability Report 2013/2014, chapter 0, pages 128-136, Czech National Bank.
    • Handle: RePEc:cnb:ocpubc:fsr1314/2
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    References listed on IDEAS

    as
    1. Alexis Derviz & Jiri Podpiera, 2006. "Cross-Border Lending Contagion in Multinational Banks," Working Papers 2006/9, Czech National Bank.
    2. Chen, Ying & Härdle, Wolfgang & Jeong, Seok-Oh, 2008. "Nonparametric Risk Management With Generalized Hyperbolic Distributions," Journal of the American Statistical Association, American Statistical Association, vol. 103(483), pages 910-923.
    3. Michal Skorepa & Jakub Seidler, 2015. "Capital buffers based on banks’ domestic systemic importance: selected issues," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 7(3), pages 207-220, August.
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    8. Zlatuse Komarkova & Vaclav Hausenblas & Jan Frait, 2012. "How To Identify Systemically Important Financial Institutions," Occasional Publications - Chapters in Edited Volumes, in: CNB Financial Stability Report 2011/2012, chapter 0, pages 100-111, Czech National Bank.
    9. Michal Skorepa & Jakub Seidler, 2013. "An Additional capital requirements based on the domestic systemic importance of a bank," Occasional Publications - Chapters in Edited Volumes, in: CNB Financial Stability Report 2012/2013, chapter 0, pages 96-102, Czech National Bank.
    10. Ralph De Haas & Iman Van Lelyveld, 2014. "Multinational Banks and the Global Financial Crisis: Weathering the Perfect Storm?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(s1), pages 333-364, February.
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