Premium
On the Role of Regulatory Banking Capital
Author(s) -
Benink Harald,
Daníelsson Jón,
Jónsson Ásgeir
Publication year - 2008
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/j.1468-0416.2007.00134.x
Subject(s) - risk weighted asset , capital requirement , risk adjusted return on capital , basel ii , capital adequacy ratio , basel i , basel iii , business , asset (computer security) , context (archaeology) , economic capital , operational risk , incentive , capital (architecture) , economics , financial system , monetary economics , financial capital , finance , risk management , microeconomics , capital formation , computer science , archaeology , profit (economics) , history , paleontology , computer security , biology
In this paper the authors study the role of regulatory banking capital and analyze the incentive effects of the Basel II Accord. They argue that Basel II may become a source of systemic risk due to endogenous risk and the risk sensitivity of the capital requirements. In this context they note that financial instability may enter via the asset side of the banks' balance sheets when banks are forced to sell assets in order to maintain the capital buffer prescribed by Basel II.