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Coordination of capital buffer and risk profile under supervision of Central Bank


  • Joao Andre Marques Pereira

    () (Banco Central do Brasil)

  • Richard Saito

    () (Escola de Administração de Empresas de São Paulo, Fundação Getúlio Vargas)


This work investigates how banks react to the capital constraints imposed by the Central Bank. Using models that incorporate the simultaneity of capital decisions and risk decisions, our findings confirm the capital buffer theory, which predicts that adjustments to capital and adjustments to risk are positively related. Moreover, we find that regulatory pressures induce banks to increase their risk levels in response to capital adjustments but not vice versa.

Suggested Citation

  • Joao Andre Marques Pereira & Richard Saito, 2015. "Coordination of capital buffer and risk profile under supervision of Central Bank," Brazilian Review of Finance, Brazilian Society of Finance, vol. 13(1), pages 74-101.
  • Handle: RePEc:brf:journl:v:13:y:2015:i:1:p:74-101

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    References listed on IDEAS

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    More about this item


    capital regulation; prudential regulation; ; capital regulation; prudential regulation;

    JEL classification:

    • 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


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