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Rollover and Capital Adequacy Requirements

Author

Listed:
  • YASUDA, Yukihiro
  • 安田, 行宏

Abstract

This paper shows theoretically that if bank supervision is weak, capital adequacy requirements provide an incentive for troubled banks with their non-performing loans to refinance their client distressed firms, even those with poor prospects. We also argue that in some cases rollover is desirable because the bank can resolve the debt overhang problem of its clients. Therefore, results such as these indicate that loan rollovers need to be assessed more carefully.

Suggested Citation

  • YASUDA, Yukihiro & 安田, 行宏, 2016. "Rollover and Capital Adequacy Requirements," Working Paper Series G-1-11, Hitotsubashi University Center for Financial Research.
    • Handle: RePEc:hit:hcfrwp:g-1-11
    as

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    File URL: https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/27917/070hcfrWP_1_011.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Rollover; Capital adequacy requirements; Debt overhang;
    All these keywords.

    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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