Safe and Sound Banking: A Role for Countercyclical Regulatory Requirements?
AbstractMost explanations of the crisis of 2007-2009 emphasize the role of the preceding boom in real estate and asset markets in a variety of advanced countries. As a result, an idea that is gaining support among various groups is how to make Basel II or any regulatory regime less procyclical. This paper addresses the rationale for and likely contribution of such policies. Making provisioning (or capital) requirements countercyclical is one way potentially to address procyclicality, and accordingly it looks at the efforts of the authorities in Spain and Colombia, two countries in which countercyclical provisioning has been tried, to see what the track record has been. As explained there, these experiments have been at best too recent and limited to put much weight on them, but they are much less favorable for supporting this practice than is commonly admitted. The paper then addresses concerns and implementation issues with countercyclical capital or provisioning requirements, including why their impact might be expected to be limited, and concludes with recommendations for developing country officials who want to learn how to make their financial systems less exposed to crises.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Department of Economics, Williams College in its series Department of Economics Working Papers with number 2009-06.
Length: 37 pages
Date of creation: Dec 2009
Date of revision:
Other versions of this item:
- Gerard Caprio, Jr, . "Safe and Sound Banking: A Role for Countercyclical Regulatory Requirements?," The Institute for International Integration Studies Discussion Paper Series iiisdp311, IIIS.
- Caprio, Gerard, Jr., 2010. "Safe and sound banking : a role for countercyclical regulatory requirements ?," Policy Research Working Paper Series 5198, The World Bank.
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-09-25 (All new papers)
- NEP-BAN-2010-09-25 (Banking)
- NEP-REG-2010-09-25 (Regulation)
- NEP-RMG-2010-09-25 (Risk Management)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Carmen M. Reinhart & Kenneth S. Rogoff, 2014.
"This Time is Different: A Panoramic View of Eight Centuries of Financial Crises,"
Annals of Economics and Finance,
Society for AEF, vol. 15(2), pages 1065-1188, November.
- Carmen M. Reinhart & Kenneth S. Rogoff, 2008. "This Time is Different: A Panoramic View of Eight Centuries of Financial Crises," NBER Working Papers 13882, National Bureau of Economic Research, Inc.
- Carmen M. Reinhart & Kenneth S. Rogoff, 2008. "This Time is Different: A Panoramic View of Eight Centuries of Financial Crises," CEMA Working Papers 595, China Economics and Management Academy, Central University of Finance and Economics.
- Adam S. Posen, 2006.
"Why Central Banks Should Not Burst Bubbles,"
Working Paper Series
WP06-1, Peterson Institute for International Economics.
- Peter Temin & Joachim Voth, 2004.
"Riding the South Sea bubble,"
Economics Working Papers
861, Department of Economics and Business, Universitat Pompeu Fabra.
- Temin, Peter & Voth, Hans-Joachim, 2004. "Riding the South Sea Bubble," CEPR Discussion Papers 4221, C.E.P.R. Discussion Papers.
- Peter Temin & Hans-Joachim Voth, 2003. "Riding the South Sea Bubble," Working Papers 91, Barcelona Graduate School of Economics.
- Peter Temin & Hans-Joachim Voth, 2004. "Riding the South See Bubble," Working Papers 213, Barcelona Graduate School of Economics.
- Larry D. Wall & Timothy W. Koch, 2000. "Bank loan-loss accounting: a review of theoretical and empirical evidence," Economic Review, Federal Reserve Bank of Atlanta, issue Q2, pages 1-20.
- Markus K. Brunnermeier, 2009. "Deciphering the Liquidity and Credit Crunch 2007-2008," Journal of Economic Perspectives, American Economic Association, vol. 23(1), pages 77-100, Winter.
- Athanasoglou, Panayiotis & Ioannis, Daniilidis & Manthos, Delis, 2013.
"Bank procyclicality and output: Issues and policies,"
50830, University Library of Munich, Germany.
- Athanasoglou, Panayiotis P. & Daniilidis, Ioannis & Delis, Manthos D., 2014. "Bank procyclicality and output: Issues and policies," Journal of Economics and Business, Elsevier, vol. 72(C), pages 58-83.
- Otaviano Canuto & Swati R. Ghosh, 2013. "Dealing with the Challenges of Macro Financial Linkages in Emerging Markets," World Bank Publications, The World Bank, number 16202, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Stephen Sheppard).
If references are entirely missing, you can add them using this form.