Liquidity and capital requirements and the probability of bank failure

Arbeitspapier

Using the model of Rochet and Vives (2004), this note shows that a prudential regulator can in general not mitigate a bank's failure risk solely by means of liquidity requirements. However, their effectiveness can be restored if, in addition, minimum capital requirements are met. This provides a rationale for capital requirements beyond the commonly envoked reasoning that they are to be used to control the riskiness of banks' asset portfolios.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: SFB 649 Discussion Paper ; No. 2010,027

Classification and Topics

• Classification: Wirtschaft ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Financial Institutions and Services: Government Policy and Regulation
• Subject: prudential regulation ; liquidity requirements ; minimum capital requirements ; global games ; Bankinsolvenz ; Bankenaufsicht ; Mindestreservepolitik ; Eigenkapitalvorschriften ; Bankenliquidität ; Spieltheorie ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): König, Philipp Johann
• Event: Veröffentlichung
• (who): Humboldt University of Berlin, Collaborative Research Center 649 - Economic Risk
• (where): Berlin
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/39333
• Last update: 10.03.2025, 11:45 AM CET