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Bank capital regulation with random audits

✍ Scribed by Sudipto Bhattacharya; Manfred Plank; Günter Strobl; Josef Zechner

Book ID
104293237
Publisher
Elsevier Science
Year
2002
Tongue
English
Weight
173 KB
Volume
26
Category
Article
ISSN
0165-1889

No coin nor oath required. For personal study only.

✦ Synopsis

We consider a model of optimal bank closure rules (cum capital replenishment by banks), with Poisson-distributed audits of the bank's asset value by the regulator, with the goal of eliminating (ameliorating) the incentives of levered bank shareholders=managers to take excessive risks in their choice of underlying assets. The roles of (tax or other) subsidies on deposit interest payments by the bank, and of the auditing frequency are examined.

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Bank regulation under nonbinding capital
Bank regulation under nonbinding capital guidelines
✍ Sarah B. Kendall 📂 Article 📅 1992 🏛 Springer 🌐 English ⚖ 629 KB

A one-period model of bank equity is presented in which the end of the period can be interpreted as the next regulatory examination. A capital guideline is in place that may or may not be met as the values of the bank's assets and liabilities fluctuate during the period. If the guideline is not met