On the Role of Regulatory Banking Capital |
| |
| Authors: | Harald Benink Jón Daníelsson Ásgeir Jónsson |
| |
| Institution: | 1. Professor of Finance at RSM Erasmus University in Rotterdam, the Netherlands;2. Ph.D. in Economics from Duke University;3. Ph.D. in Monetary Economics from Indiana University |
| |
| Abstract: | 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. |
| |
| Keywords: | |
|
