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Ex-Ante Versus Ex-Post Regulation Of Bank Capital

In: Banking And Capital Markets New International Perspectives

Author

Listed:
  • Arup Daripa

    (University of London, UK)

  • Simone Varotto

    (University of Reading, UK)

Abstract

The following sections are included:IntroductionThe ModelThe Bank's Objective FunctionThe Regulator's Objective FunctionInformationA Picture of the ModelThe Regulatory BenchmarkEx-Ante RegulationResult 1 (Importance of Information on Underlying Risk)Result 2 (Relative Unimportance of Information on Managerial Risk Aversion)Ex-Post RegulationResult 3 (Use of Bank's Expertise)Result 4 (Importance of Information on the Manager's Type)Combining Ex-Ante and Ex-Post RegulationResult 5Result 6 (Asymmetry Under High Safety Bias)Regressive Property and Bunching Effect: An Example with Linear PenaltiesTwo Special CasesPoor Bank Information on RiskResult 7Absence of Full Control Through PenaltiesResult 8Ex-Ante and Ex-Post Regulation in Basel IIConclusionEndnotesReferences

Suggested Citation

  • Arup Daripa & Simone Varotto, 2010. "Ex-Ante Versus Ex-Post Regulation Of Bank Capital," World Scientific Book Chapters, in: Lloyd P Blenman & Harold A Black & Edward J Kane (ed.), Banking And Capital Markets New International Perspectives, chapter 2, pages 29-58, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814273619_0002
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    2. Charles-Olivier Amédée-Manesme & Fabrice Barthélémy, 2018. "Ex-ante real estate Value at Risk calculation method," Annals of Operations Research, Springer, vol. 262(2), pages 257-285, March.
    3. Dalla Pellegrina Lucia & Saraceno Margherita, 2011. "Securities Class Actions: A Helping Hand for Bank Regulators in Trouble?," Review of Law & Economics, De Gruyter, vol. 7(1), pages 214-242, July.
    4. Abdulrahman Alrabiah & Steve Drew, 2020. "Proactive Management of Regulatory Policy Ripple Effects via a Computational Hierarchical Change Management Structure," Risks, MDPI, vol. 8(2), pages 1-29, May.
    5. Le Pape, Nicolas & Zhao, Kai, 2014. "Horizontal mergers and uncertainty," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy, vol. 8, pages 1-31.
    6. Awdeh, Ali & EL-Moussawi, Chawki & Machrouh, Fouad, 2011. "The Effect of Capital Requirements on Banking Risk," MPRA Paper 119114, University Library of Munich, Germany.

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    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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