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The Relationship between Risk and Capital in Swiss commercial Banks: A Panel Study

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Author Info
Robert Bichsel () (Swiss National Bank)
Jürg Blum () (Swiss National Bank)
Abstract

In this paper we investigate the relationship between changes in risk and changes in leverage for a panel of Swiss banks. Using market data for risk and both accounting and market data for capital over the period between 1990 and 2002, we find a positive correlation between changes in capital and changes in risk, i.e. higher levels of capital are associated with higher levels of risk. Despite this positive correlation, however, we do not find significant relationship between the default probability and the capital ratio.

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File URL: http://www.szgerzensee.ch/fileadmin/Dateien_Anwender/Dokumente/working_papers/wp-0204.pdf
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Paper provided by Swiss National Bank, Study Center Gerzensee in its series Working Papers with number 02.04.

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Length: 16 pages
Date of creation: Oct 2002
Date of revision:
Handle: RePEc:szg:worpap:0204

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  1. Weber, Martin & Kleff, Volker, 2003. "How Do Banks Determine Capital? : Empirical Evidence for Germany," ZEW Discussion Papers 03-66, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
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This page was last updated on 2009-12-16.

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