Capital adequacy and asset securitization: an assessment of the world's central banks |
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| Authors: | Charles E Maxwell Lawrence J Gitman |
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| Institution: | 1. Associate Professor of Finance , Murray State University , Kentucky;2. Professor of Finance , San Diego State University , |
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| Abstract: | National banking systems around the world are subject to disruption through the failure of a single institution. To lessen this risk, regulations governing bank definition, capital adequacy, overdraft operations, and asset securitization are needed. This article reports on these four issues and concludes that (1) the definition of a bank varies widely between nations; (2) some central banks do not require that sufficient capital be maintained to attenuate the effect of internal or external shocks; (3) overdraft operations, where allowed, often result in a high degree of system risk; and (4) off-balance sheet financing operations may not be as risky as first was reported. |
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