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Bank capital buffer and risk adjustment decisions

  • Jokipii, Terhi
  • Milne, Alistair

Building an unbalanced panel of United States (US) bank holding company (BHC) and commercial bank balance-sheet data from 1986 to 2008, we examine the relationship between short-term capital buffer and portfolio risk adjustments. Our estimations indicate that the relationship over the sample period is a positive two-way relationship. Moreover, we show that the management of such adjustments is dependent on the degree of bank capitalization. Further investigation through time-varying analysis reveals a cyclical pattern in the uncovered relationship: negative after the 1991/1992 crisis, and positive before 1991 and after 1997.

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File URL: http://www.sciencedirect.com/science/article/pii/S1572308910000203
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Article provided by Elsevier in its journal Journal of Financial Stability.

Volume (Year): 7 (2011)
Issue (Month): 3 (August)
Pages: 165-178

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Handle: RePEc:eee:finsta:v:7:y:2011:i:3:p:165-178
Contact details of provider: Web page: http://www.elsevier.com/locate/jfstabil

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