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Bank capital adequacy framework

Author

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  • Faidon Kalfaoglou

    () (Bank of Greece)

Abstract

The debt crisis in Greece and the resulting haircut on sovereign bonds (known as PSI) adversely affected bank capital and resulted in state funds being required to recapitalize the banks. During that process, several questions arose about the meaning of capital adequacy in banks. This paper considers the question from a non-technical point of view and surveys the regulatory requirements for capital adequacy contained in the so-called Basel framework. It analyses all contributing parts of the Capital Adequacy Ratio (CAR), including regulatory capital, credit risk, market risk and operational risk, raising in each case the concerns of the literature as well as recent contributions. For the reader’s convenience, the more technical aspects are presented in boxes and annexes.

Suggested Citation

  • Faidon Kalfaoglou, 2012. "Bank capital adequacy framework," Economic Bulletin, Bank of Greece, issue 36, pages 43-81, April.
  • Handle: RePEc:bog:econbl:y:2012:i:36:p:43-81
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    File URL: http://www.bankofgreece.gr/BogEkdoseis/econbull201204.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Costas N. Kanellopoulos, 2014. "The private sector Greek labour market during the crisis," Economic Bulletin, Bank of Greece, issue 39, pages 21-36, July.
    2. Petros M. Migiakis, 2012. "Reviewing the proposals for common bond issuances by the euro-area sovereign under a long-term perspective," Economic Bulletin, Bank of Greece, issue 37, pages 43-54, December.
    3. Costas N. Kanellopoulos, 2012. "The Size and structure of uninsured employment," Economic Bulletin, Bank of Greece, issue 37, pages 23-41, December.
    4. Zacharias Bragoudakis & Dimitrios Sideris, 2012. "Do retail gasoline prices adjust symmetrically to crude oil price changes? the case of the Greek oil market," Economic Bulletin, Bank of Greece, issue 37, pages 7-21, December.
    5. Sophia Lazaretou, 2014. "The smart economy: cultural and creative industries in Greece: can they be a way out of the crisis?," Economic Bulletin, Bank of Greece, issue 39, pages 73-103, July.
    6. Dimitra Dimitropoulou & Anastasia Koutsomanoli-Filippaki & Evangelos Charalambakis & Georgios Aggelis, 2014. "The financing of Greek enterprises before and during the crisis," Economic Bulletin, Bank of Greece, issue 39, pages 7-20, July.
    7. Aikaterini Chaireti, 2014. "The housing situation of residents of Greece in the time of crisis 2008-2012," Economic Bulletin, Bank of Greece, issue 39, pages 105-141, July.
    8. Faidon Kalfaoglou, 2014. "European banking union: “Europeanising” banks’ financial safety net," Economic Bulletin, Bank of Greece, issue 39, pages 37-72, July.

    More about this item

    Keywords

    capital adequacy; regulatory capital; credit risk; market risk; operational risk;

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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