Capital regulation after the crisis: Business as usual?

Arbeitspapier

The paper discusses the reform of capital regulation of banks in the wake of the financial crisis of 2007/2009. Whereas the Basel Committee on Banking Supervision seems to go for marginal changes here and there, the paper calls for a thorough overhaul, moving away from risk calibration and raising capital requirements very substantially. The argument is based on the observation that the current system of risk-calibrated capital requirements, in particular under the model-based approach, played a key role in allowing banks to be undercapitalized prior to the crisis, with strong systemic effects for deleveraging multipliers and for the functioning of interbank markets. The argument is also based on the observation that the current system has no theoretical foundation, its objectives are ill-specified, and its effects have not been thought through, either for the individual bank or for the system as a whole. Objections to substantial increases in capital requirements rest on arguments that run counter to economic logic or are themselves evidence of moral hazard and a need for regulation.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Preprints of the Max Planck Institute for Research on Collective Goods ; No. 2010,31

Classification and Topics

• Classification: Wirtschaft ; Financial Crises ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Financial Institutions and Services: Government Policy and Regulation
• Subject: financial crisis ; Basel Accord ; banking regulation ; capital requirements ; modelbased approach ; systemic risk ; Finanzmarktkrise ; Kapitalmarktliberalisierung ; Basel II ; Bankenpolitik ; Regulierung ; Wirkungsanalyse ; Welt

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Hellwig, Martin
• Event: Veröffentlichung
• (who): Max Planck Institute for Research on Collective Goods
• (where): Bonn
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/57491
• Last update: 10.03.2025, 11:46 AM CET