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Benefits and Costs of Bank Capital

Author

Listed:
  • Jihad Dagher
  • Giovanni Dell'Ariccia
  • Luc Laeven
  • Lev Ratnovski
  • Hui Tong

Abstract

The appropriate level of bank capital and, more generally, a bank’s capacity to absorb losses, has been at the core of the post-crisis policy debate. This paper contributes to the debate by focusing on how much capital would have been needed to avoid imposing losses on bank creditors or resorting to public recapitalizations of banks in past banking crises. The paper also looks at the welfare costs of tighter capital regulation by reviewing the evidence on its potential impact on bank credit and lending rates. Its findings broadly support the range of loss absorbency suggested by the Financial Stability Board (FSB) and the Basel Committee for systemically important banks.

Suggested Citation

  • Jihad Dagher & Giovanni Dell'Ariccia & Luc Laeven & Lev Ratnovski & Hui Tong, 2016. "Benefits and Costs of Bank Capital," IMF Staff Discussion Notes 16/04, International Monetary Fund.
  • Handle: RePEc:imf:imfsdn:16/04
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    Citations

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    Cited by:

    1. Jord�, �scar & Richter, Bj�rn & Schularick, Moritz & Taylor, Alan M., 2017. "Bank Capital Redux: Solvency, Liquidity, and Crisis," CEPR Discussion Papers 11934, C.E.P.R. Discussion Papers.
    2. William R. Cline, 2016. "Benefits and Costs of Higher Capital Requirements for Banks," Working Paper Series WP16-6, Peterson Institute for International Economics.
    3. repec:nbp:nbpbik:v:48:y:2017:i:2:p:119-148 is not listed on IDEAS
    4. Perri, Fabrizio & Stefanidis, Georgios, 2017. "Capital Requirements and Bailouts," Staff Report 554, Federal Reserve Bank of Minneapolis.
    5. Simon Firestone & Amy Lorenc & Benjamin Ranish, 2017. "An Empirical Economic Assessment of the Costs and Benefits of Bank Capital in the US," Finance and Economics Discussion Series 2017-034, Board of Governors of the Federal Reserve System (U.S.).
    6. Valeriya Dinger & Vlad Marincas & Francesco Vallascas, 2018. "Systemic Effects of Bank Equity Issues: Competition, Stabilization and Contagion," Working Papers 111, Institute of Empirical Economic Research, Osnabrueck University.
    7. repec:eee:jebusi:v:95:y:2018:i:c:p:26-46 is not listed on IDEAS
    8. Rehbein, Oliver, 2018. "Flooded through the back door: Firm-level effects of banks' lending shifts," IWH Discussion Papers 4/2018, Halle Institute for Economic Research (IWH).
    9. repec:eee:moneco:v:90:y:2017:i:c:p:193-213 is not listed on IDEAS

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