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Bank Capital Regulation in Contemporary Banking Theory: A Review of the Literature
Author(s) -
Santos João A. C.
Publication year - 2001
Publication title -
financial markets, institutions and instruments
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.386
H-Index - 23
eISSN - 1468-0416
pISSN - 0963-8008
DOI - 10.1111/1468-0416.00042
Subject(s) - capital requirement , capital adequacy ratio , basel i , capital (architecture) , risk adjusted return on capital , financial capital , economics , economic capital , basel iii , bank regulation , basel ii , financial system , capital formation , business , market economy , human capital , archaeology , history , incentive
This paper reviews the theoretical literature on bank capital regulation and analyzes some of the approaches to redesigning the 1988 Basel Accord on capital standards. The paper starts with a review of the literature on the design of the financial system and the existence of banks. It proceeds with a presentation of the market failures that justify banking regulation and an analysis of the mechanisms that have been suggested to deal with these failures. The paper then reviews the theoretical literature on bank capital regulation. This is followed by a brief history of capital regulation since the 1988 Basel Capital Accord and a presentation of both the alternative approaches that have been put forward on setting capital standards and the Basel Committee's proposal for a new capital adequacy framework.