Bank Accounting, Bank Regulation, and Capital Requirements: A Review

SynopsisThe research problemThe Basel framework has been a significant development in the world of banking and finance, and it is imperative to have a firm understanding of these regulations and their implications for empirical accounting research, particularly as they relate to bank capital and capital requirements.MotivationThe motivation of this paper is to advance the understanding of the role of accounting in post-GFC bank regulations and to empower researchers by improving their understanding of the regulatory process and their understanding of regulatory resources.Target populationGlobal banks, bank regulators, and bank standard setters.Adopted methodologyThis paper aims to provide an overview of the interactions between bank accounting and prudential regulation, focusing specifically on post-GFC regulations such as Basel III.FindingsI document differences between bank regulation and financial reporting standards, which are in a constant state of flux. Differences manifest themselves in definitional distinctions, such as the fact that bank capital is not the same as equity, the scope of application and associated data availability, the standard setting process, and stakeholder interests. The disparities are dynamic and specific to each country or jurisdiction, which adds complexity to the research process. Despite the efforts of the Basel Committee to establish unified standards, there has been an increasing divergence in the implementation of global banking rules. These developments present new research opportunities.