This paper develops a banking-sector framework with heterogeneous loan monitoring costs. Banks are exposed to the moral hazard behavior of borrowers and endogenously choose whether to monitor their loans to [...]
There is a strong consensus that reform of the financial regulatory system must include significant increases in the capital requirements for banks. All else equal, this should make the banks [...]
There is a strong consensus among policymakers that there need to be higher minimum capital requirements for banks in order to foster a more stable financial system and to help [...]
While it is recognized that the high degree of leverage used by financial institutions creates systemic risks and other negative externalities, many argue that equity financing is “expensive,” and that [...]
Several possible explanations have been suggested for this untoward state of affairs--the lack of servicer capacity to execute modifications, purported financial incentives for servicers to foreclose rather than modify, what [...]
We examine the pervasive view that “equity is expensive,” which leads to claims that high capital requirements are costly and would affect credit markets adversely. We find that arguments made [...]
This paper analyzes the effect of the business cycle on the regulatory capital buffers of German local banks in the period 1993–2004. The capital buffers are found to fluctuate countercyclically [...]
The Basel regime is an international system of capital adequacy regulation designed to strengthen banks’ financial health and the safety and soundness of the financial system as a whole. It [...]
While the current capital adequacy framework, Basel II, aims to make banks’ capital requirements more sensitive to the underlying risk of the assets, it may also introduce an additional source [...]
Building an unbalanced panel of United States (US) bank holding company (BHC) and commercial bank balance-sheet data from 1986 to 2008, we examine the relationship between short-term capital buffer and [...]