This study aims at assessing empirically the determinants of changes in risk-weighted bank capital ratios in the 1990s in Germany, France, Italy, the Netherlands, the UK and the US. Both bank-specific characteristics, factors at the banking industry level and the degree of undercapitalization are found to be relevant for bank capital ratios. The results suggest that in most cases either banks value the risk of their portfolio higher than the outcome generated by the BIS-risk weighting scheme, or they need to take additional country- or bank-specific capital requirements into account. In all countries commercial banks face a downward pressure on their capital ratios due to an intensified competition. Finally, capital regulation seems to be effective in influencing bank capital ratios.
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Find related papers by JEL classification: G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation O57 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
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