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A prolegomenon to future capital requirements

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  • Arturo Estrella

Abstract

Bank supervisors have made significant strides since 1980 in the area of capital requirements, and they are currently pursuing further refinements. This article looks beyond such developments at longer term supervisory goals. Abstracting to some extent from the current regulatory framework, the author attempts to delineate a set of fundamental principles for future work on capital requirements. He distinguishes minimum capital--an objective standard imposed by regulators across firms--from optimum capital--a subjective standard adopted by individual firms to cover their own risks-- and shows how the two concepts can form the basis for a general supervisory approach to capital.

Suggested Citation

  • Arturo Estrella, 1995. "A prolegomenon to future capital requirements," Economic Policy Review, Federal Reserve Bank of New York, issue Jul, pages 1-12.
  • Handle: RePEc:fip:fednep:y:1995:i:jul:p:1-12:n:v.1.no.2
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    References listed on IDEAS

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    1. White, Lawrence J, 1989. "The Reform of Federal Deposit Insurance," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 11-29, Fall.
    2. Franklin R. Edwards & Frederic S. Mishkin, 1995. "The decline of traditional banking: implications for financial stability and regulatory policy," Economic Policy Review, Federal Reserve Bank of New York, issue Jul, pages 27-45.
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    Citations

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    Cited by:

    1. S. Mishkin, Frederic, 1999. "Financial consolidation: Dangers and opportunities," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 675-691, February.
    2. Mingo, John J., 2000. "Policy implications of the Federal Reserve study of credit risk models at major US banking institutions," Journal of Banking & Finance, Elsevier, vol. 24(1-2), pages 15-33, January.
    3. Darryll Hendricks & Beverly Hirtle, 1997. "Bank capital requirements for market risk: the internal models approach," Economic Policy Review, Federal Reserve Bank of New York, issue Dec, pages 1-12.
    4. Jose A. Lopez, 1996. "Regulatory Evaluation of Value-at-Risk Models," Center for Financial Institutions Working Papers 96-51, Wharton School Center for Financial Institutions, University of Pennsylvania.
    5. Franz R. Hahn, "undated". "Macroprudential Financial Regulation and Monetary Policy," WIFO Working Papers 154, WIFO.
    6. Arturo Estrella & Sangkyun Park & Stavros Peristiani, 2000. "Capital ratios as predictors of bank failure," Economic Policy Review, Federal Reserve Bank of New York, issue Jul, pages 33-52.
    7. Andrew Kuritzkes & Til Schuermann & Scott M. Weiner, 2002. "Risk Measurement, Risk Management and Capital Adequacy in Financial Conglomerates," Center for Financial Institutions Working Papers 03-02, Wharton School Center for Financial Institutions, University of Pennsylvania.
    8. Arturo Estrella, 1998. "The Future of Regulatory Capital: General Principles and Specific Proposals," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 134(IV), pages 599-616, December.
    9. Jürgen Von Hagen & Ingo Fender, 1998. "Central Bank Policy in a More Perfect Financial System," Open Economies Review, Springer, vol. 9(1), pages 493-532, January.
    10. Beverly Hirtle & Mark E. Levonian & Marc R. Saidenberg & Stefan Walter & David M. Wright, 2001. "Using credit risk models for regulatory capital: issues and options," Economic Policy Review, Federal Reserve Bank of New York, issue Mar, pages 19-36.
    11. Arturo Estrella, 1998. "Formulas or supervision? Remarks on the future of regulatory capital," Economic Policy Review, Federal Reserve Bank of New York, issue Oct, pages 191-200.

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    Keywords

    Bank capital ; Bank supervision;

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