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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
    as

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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Bank Capital and Stress Tests: The Foundation of a Thriving Economy
      by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets on 2018-07-23 11:26:07

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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    Cited by:

    1. Òscar Jordà & Björn Richter & Moritz Schularick & Alan M. Taylor, 2017. "Bank Capital Redux: Solvency, Liquidity, and Crisis," NBER Working Papers 23287, National Bureau of Economic Research, Inc.
    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. Cecchetti, Stephen G & Schoenholtz, Kermit, 2017. "Regulatory Reform: A Scorecard," CEPR Discussion Papers 12465, C.E.P.R. Discussion Papers.
    4. repec:nbp:nbpbik:v:48:y:2017:i:2:p:119-148 is not listed on IDEAS
    5. Perri, Fabrizio & Stefanidis, Georgios, 2017. "Capital Requirements and Bailouts," Staff Report 554, Federal Reserve Bank of Minneapolis.
    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. 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 (US).
    8. repec:spr:sjecst:v:154:y:2018:i:1:d:10.1186_s41937-018-0025-z is not listed on IDEAS
    9. Ambrocio, Gene & Jokivuolle, Esa, 2017. "Should bank capital requirements be less risk-sensitive because of credit constraints?," Research Discussion Papers 10/2017, Bank of Finland.
    10. repec:eee:finsta:v:39:y:2018:i:c:p:1-27 is not listed on IDEAS
    11. Ginette Eramo & Roberto Felici & Paolo Finaldi Russo & Federico Signoretti, 2018. "How slow is the recovery of loans to firms in Italy?," Questioni di Economia e Finanza (Occasional Papers) 469, Bank of Italy, Economic Research and International Relations Area.
    12. repec:onb:oenbmp:y:2018:i:q2/18:b:2 is not listed on IDEAS
    13. 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.
    14. repec:fau:fauart:v:68:y:2018:i:3:p:202-244 is not listed on IDEAS
    15. repec:eee:jfinin:v:35:y:2018:i:pb:p:17-29 is not listed on IDEAS
    16. repec:eee:jebusi:v:95:y:2018:i:c:p:26-46 is not listed on IDEAS
    17. 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).
    18. Gambacorta, Leonardo & Shin, Hyun Song, 2018. "Why bank capital matters for monetary policy," Journal of Financial Intermediation, Elsevier, vol. 35(PB), pages 17-29.
    19. Ben Naceur, S. & Marton, Katherin & Roulet, Caroline, 2018. "Basel III and bank-lending: Evidence from the United States and Europe," Journal of Financial Stability, Elsevier, vol. 39(C), pages 1-27.
    20. repec:eee:moneco:v:90:y:2017:i:c:p:193-213 is not listed on IDEAS

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