Bank Capital and Systemic Stability
This paper distinguishes among various types of capital and examines their effect on system-wide fragility. The analysis finds that higher quality forms of capital reduce the systemic risk contribution of banks, whereas lower quality forms can have...
| Main Authors: | , |
|---|---|
| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
|
| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2014/06/19731166/bank-capital-systemic-stability http://hdl.handle.net/10986/19377 |
| id |
okr-10986-19377 |
|---|---|
| recordtype |
oai_dc |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
ACCOUNTING ARBITRAGE ASSET PRICES ASSET QUALITY ASSET RATIO ASSET VALUE ASSET VALUES ASYMMETRIC INFORMATION BAILOUT BALANCE SHEET BALANCE SHEETS BANK ACCOUNT BANK CAPITAL BANK CAPITAL REGULATION BANK COMPETITION BANK CREDITORS BANK FAILURE BANK FAILURES BANK LIQUIDITY BANK POLICY BANK REGULATION BANK RESTRUCTURING BANK RISK BANK RISK TAKING BANK RUNS BANK SAFETY BANK SIZE BANKING ASSETS BANKING CRISIS BANKING LAW BANKING SECTOR BANKING SECTORS BANKING SYSTEM BANKRUPTCY BANKS BASIS POINTS BENEFICIARIES BOOK VALUE BORROWER CALL OPTION CAPITAL ADEQUACY CAPITAL ADEQUACY RULES CAPITAL ASSET CAPITAL REGULATION CAPITAL REQUIREMENTS CAPITAL SHORTAGE CAPITAL STANDARDS CAPITALIZATION COMMERCIAL BANKS CONSOLIDATED FINANCIAL STATEMENTS CONTAGION CORPORATE DEBT CREDIT BUREAU CREDIT FLOWS CREDIT INFORMATION CREDIT MARKET CREDIT REGISTRY CREDITORS CROSS-BORDER BANKING DEBT DEFAULT PROBABILITIES DEFAULT RISK DEFAULTS DEPOSIT DEPOSIT INSURANCE DEPOSITORS DEPOSITS DUMMY VARIABLE DUMMY VARIABLES EARNINGS ECONOMIC DEVELOPMENT ECONOMIC POLICY ECONOMIC SYSTEM ECONOMICS EMERGING MARKETS EQUITY CAPITAL EQUITY INVESTOR EQUITY MARKETS EQUITY RATIO EQUITY RATIOS EQUITY RETURN EQUITY RETURNS EQUITY VALUE EQUITY VALUES EXTERNAL AUDITORS FACE VALUE FEDERAL RESERVE FEDERAL RESERVE BANK FEDERAL RESERVE BANK OF NEW YORK FINANCIAL CRISIS FINANCIAL ENGINEERING FINANCIAL INFORMATION FINANCIAL INSTITUTION FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIATION FINANCIAL RATIOS FINANCIAL REGULATION FINANCIAL SAFETY FINANCIAL SAFETY NETS FINANCIAL STABILITY FINANCIAL STUDIES FINANCIAL SYSTEM FRAUD GLOBAL BANKING GLOBAL MARKET GLOBALIZATION IMPLICIT GUARANTEE INFLATION INFORMATION ASYMMETRY INFORMATION SHARING INTEREST RATES INTERNATIONAL BANK INTERNATIONAL BANKS INTERNATIONAL FINANCIAL SYSTEM INTERNATIONAL RATING AGENCIES INTERPOLATION LAWS LEVEL OF RISK LIABILITY LIMITED LIABILITY LIQUID ASSETS LIQUIDITY CREATION LOAN LOAN GUARANTEES LOAN LOSS PROVISIONS LOAN PROVISIONING LOANABLE FUNDS LOCAL GOVERNMENTS MACROECONOMIC VARIABLES MARKET COMPETITION MARKET EQUITY MARKET INDEX MARKET INFORMATION MARKET INTEGRATION MARKET PARTICIPANTS MARKET PRICES MARKET RETURNS MARKET SHARES MARKET VALUE MORAL HAZARD NONPERFORMING LOANS OFF BALANCE SHEET OFF BALANCE SHEET EXPOSURES PORTFOLIO PORTFOLIO RISK PORTFOLIOS PRIVATE BANKS PRIVATE CREDIT PRIVATE CREDIT BUREAU PUBLIC CREDIT PUBLIC REGISTRY RATING AGENCIES REAL SECTOR REGULATORY STANDARDS REORGANIZATION RESERVES RISK ADJUSTED ASSETS RISK EXPOSURE RISK FACTORS RISK MANAGEMENT RISK MEASUREMENT RISK TAKING RISK WEIGHTED ASSETS SAFETY NET SAFETY NETS SECURITIZATION SHAREHOLDER SHAREHOLDERS STATE GUARANTEES STOCK MARKET STOCK MARKET CAPITALIZATION STOCK MARKETS STOCK RETURNS SUBORDINATED DEBT SUPERVISORY AGENCY SUPERVISORY AUTHORITIES SUPERVISORY AUTHORITY SUPERVISORY POWER SYNCHRONOUS STOCK PRICE MOVEMENTS SYSTEMIC BANKING CRISES SYSTEMIC RISK T-BILL T-BILL RATE TANGIBLE ASSETS TIER 1 CAPITAL TIER 2 CAPITAL TRANSPARENCY TREASURY TREASURY YIELD VALUATION VALUE OF ASSETS |
| spellingShingle |
ACCOUNTING ARBITRAGE ASSET PRICES ASSET QUALITY ASSET RATIO ASSET VALUE ASSET VALUES ASYMMETRIC INFORMATION BAILOUT BALANCE SHEET BALANCE SHEETS BANK ACCOUNT BANK CAPITAL BANK CAPITAL REGULATION BANK COMPETITION BANK CREDITORS BANK FAILURE BANK FAILURES BANK LIQUIDITY BANK POLICY BANK REGULATION BANK RESTRUCTURING BANK RISK BANK RISK TAKING BANK RUNS BANK SAFETY BANK SIZE BANKING ASSETS BANKING CRISIS BANKING LAW BANKING SECTOR BANKING SECTORS BANKING SYSTEM BANKRUPTCY BANKS BASIS POINTS BENEFICIARIES BOOK VALUE BORROWER CALL OPTION CAPITAL ADEQUACY CAPITAL ADEQUACY RULES CAPITAL ASSET CAPITAL REGULATION CAPITAL REQUIREMENTS CAPITAL SHORTAGE CAPITAL STANDARDS CAPITALIZATION COMMERCIAL BANKS CONSOLIDATED FINANCIAL STATEMENTS CONTAGION CORPORATE DEBT CREDIT BUREAU CREDIT FLOWS CREDIT INFORMATION CREDIT MARKET CREDIT REGISTRY CREDITORS CROSS-BORDER BANKING DEBT DEFAULT PROBABILITIES DEFAULT RISK DEFAULTS DEPOSIT DEPOSIT INSURANCE DEPOSITORS DEPOSITS DUMMY VARIABLE DUMMY VARIABLES EARNINGS ECONOMIC DEVELOPMENT ECONOMIC POLICY ECONOMIC SYSTEM ECONOMICS EMERGING MARKETS EQUITY CAPITAL EQUITY INVESTOR EQUITY MARKETS EQUITY RATIO EQUITY RATIOS EQUITY RETURN EQUITY RETURNS EQUITY VALUE EQUITY VALUES EXTERNAL AUDITORS FACE VALUE FEDERAL RESERVE FEDERAL RESERVE BANK FEDERAL RESERVE BANK OF NEW YORK FINANCIAL CRISIS FINANCIAL ENGINEERING FINANCIAL INFORMATION FINANCIAL INSTITUTION FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIATION FINANCIAL RATIOS FINANCIAL REGULATION FINANCIAL SAFETY FINANCIAL SAFETY NETS FINANCIAL STABILITY FINANCIAL STUDIES FINANCIAL SYSTEM FRAUD GLOBAL BANKING GLOBAL MARKET GLOBALIZATION IMPLICIT GUARANTEE INFLATION INFORMATION ASYMMETRY INFORMATION SHARING INTEREST RATES INTERNATIONAL BANK INTERNATIONAL BANKS INTERNATIONAL FINANCIAL SYSTEM INTERNATIONAL RATING AGENCIES INTERPOLATION LAWS LEVEL OF RISK LIABILITY LIMITED LIABILITY LIQUID ASSETS LIQUIDITY CREATION LOAN LOAN GUARANTEES LOAN LOSS PROVISIONS LOAN PROVISIONING LOANABLE FUNDS LOCAL GOVERNMENTS MACROECONOMIC VARIABLES MARKET COMPETITION MARKET EQUITY MARKET INDEX MARKET INFORMATION MARKET INTEGRATION MARKET PARTICIPANTS MARKET PRICES MARKET RETURNS MARKET SHARES MARKET VALUE MORAL HAZARD NONPERFORMING LOANS OFF BALANCE SHEET OFF BALANCE SHEET EXPOSURES PORTFOLIO PORTFOLIO RISK PORTFOLIOS PRIVATE BANKS PRIVATE CREDIT PRIVATE CREDIT BUREAU PUBLIC CREDIT PUBLIC REGISTRY RATING AGENCIES REAL SECTOR REGULATORY STANDARDS REORGANIZATION RESERVES RISK ADJUSTED ASSETS RISK EXPOSURE RISK FACTORS RISK MANAGEMENT RISK MEASUREMENT RISK TAKING RISK WEIGHTED ASSETS SAFETY NET SAFETY NETS SECURITIZATION SHAREHOLDER SHAREHOLDERS STATE GUARANTEES STOCK MARKET STOCK MARKET CAPITALIZATION STOCK MARKETS STOCK RETURNS SUBORDINATED DEBT SUPERVISORY AGENCY SUPERVISORY AUTHORITIES SUPERVISORY AUTHORITY SUPERVISORY POWER SYNCHRONOUS STOCK PRICE MOVEMENTS SYSTEMIC BANKING CRISES SYSTEMIC RISK T-BILL T-BILL RATE TANGIBLE ASSETS TIER 1 CAPITAL TIER 2 CAPITAL TRANSPARENCY TREASURY TREASURY YIELD VALUATION VALUE OF ASSETS Anginer, Deniz Demirguc-Kunt, Asli Bank Capital and Systemic Stability |
| relation |
Policy Research Working Paper;No. 6948 |
| description |
This paper distinguishes among various
types of capital and examines their effect on system-wide
fragility. The analysis finds that higher quality forms of
capital reduce the systemic risk contribution of banks,
whereas lower quality forms can have a destabilizing impact,
particularly during crisis periods. The impact of capital on
systemic risk is less pronounced for smaller banks, for
banks located in countries with more generous safety nets,
and in countries with institutions that allow for better
public and private monitoring of financial institutions. The
results show that regulatory capital is effective in
reducing systemic risk and that regulatory risk weights are
correlated with higher future asset volatility, but this
relationship is significantly weaker for larger banks. The
paper also finds that increased regulatory risk-weights not
correlated with future asset volatility increase systemic
fragility. Overall, the results are consistent with the
theoretical literature that emphasizes capital as a
potential buffer in absorbing liquidity, information, and
economic shocks reducing contagious defaults. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Anginer, Deniz Demirguc-Kunt, Asli |
| author_facet |
Anginer, Deniz Demirguc-Kunt, Asli |
| author_sort |
Anginer, Deniz |
| title |
Bank Capital and Systemic Stability |
| title_short |
Bank Capital and Systemic Stability |
| title_full |
Bank Capital and Systemic Stability |
| title_fullStr |
Bank Capital and Systemic Stability |
| title_full_unstemmed |
Bank Capital and Systemic Stability |
| title_sort |
bank capital and systemic stability |
| publisher |
World Bank, Washington, DC |
| publishDate |
2014 |
| url |
http://documents.worldbank.org/curated/en/2014/06/19731166/bank-capital-systemic-stability http://hdl.handle.net/10986/19377 |
| _version_ |
1764443761145806848 |
| spelling |
okr-10986-193772021-04-23T14:03:51Z Bank Capital and Systemic Stability Anginer, Deniz Demirguc-Kunt, Asli ACCOUNTING ARBITRAGE ASSET PRICES ASSET QUALITY ASSET RATIO ASSET VALUE ASSET VALUES ASYMMETRIC INFORMATION BAILOUT BALANCE SHEET BALANCE SHEETS BANK ACCOUNT BANK CAPITAL BANK CAPITAL REGULATION BANK COMPETITION BANK CREDITORS BANK FAILURE BANK FAILURES BANK LIQUIDITY BANK POLICY BANK REGULATION BANK RESTRUCTURING BANK RISK BANK RISK TAKING BANK RUNS BANK SAFETY BANK SIZE BANKING ASSETS BANKING CRISIS BANKING LAW BANKING SECTOR BANKING SECTORS BANKING SYSTEM BANKRUPTCY BANKS BASIS POINTS BENEFICIARIES BOOK VALUE BORROWER CALL OPTION CAPITAL ADEQUACY CAPITAL ADEQUACY RULES CAPITAL ASSET CAPITAL REGULATION CAPITAL REQUIREMENTS CAPITAL SHORTAGE CAPITAL STANDARDS CAPITALIZATION COMMERCIAL BANKS CONSOLIDATED FINANCIAL STATEMENTS CONTAGION CORPORATE DEBT CREDIT BUREAU CREDIT FLOWS CREDIT INFORMATION CREDIT MARKET CREDIT REGISTRY CREDITORS CROSS-BORDER BANKING DEBT DEFAULT PROBABILITIES DEFAULT RISK DEFAULTS DEPOSIT DEPOSIT INSURANCE DEPOSITORS DEPOSITS DUMMY VARIABLE DUMMY VARIABLES EARNINGS ECONOMIC DEVELOPMENT ECONOMIC POLICY ECONOMIC SYSTEM ECONOMICS EMERGING MARKETS EQUITY CAPITAL EQUITY INVESTOR EQUITY MARKETS EQUITY RATIO EQUITY RATIOS EQUITY RETURN EQUITY RETURNS EQUITY VALUE EQUITY VALUES EXTERNAL AUDITORS FACE VALUE FEDERAL RESERVE FEDERAL RESERVE BANK FEDERAL RESERVE BANK OF NEW YORK FINANCIAL CRISIS FINANCIAL ENGINEERING FINANCIAL INFORMATION FINANCIAL INSTITUTION FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIATION FINANCIAL RATIOS FINANCIAL REGULATION FINANCIAL SAFETY FINANCIAL SAFETY NETS FINANCIAL STABILITY FINANCIAL STUDIES FINANCIAL SYSTEM FRAUD GLOBAL BANKING GLOBAL MARKET GLOBALIZATION IMPLICIT GUARANTEE INFLATION INFORMATION ASYMMETRY INFORMATION SHARING INTEREST RATES INTERNATIONAL BANK INTERNATIONAL BANKS INTERNATIONAL FINANCIAL SYSTEM INTERNATIONAL RATING AGENCIES INTERPOLATION LAWS LEVEL OF RISK LIABILITY LIMITED LIABILITY LIQUID ASSETS LIQUIDITY CREATION LOAN LOAN GUARANTEES LOAN LOSS PROVISIONS LOAN PROVISIONING LOANABLE FUNDS LOCAL GOVERNMENTS MACROECONOMIC VARIABLES MARKET COMPETITION MARKET EQUITY MARKET INDEX MARKET INFORMATION MARKET INTEGRATION MARKET PARTICIPANTS MARKET PRICES MARKET RETURNS MARKET SHARES MARKET VALUE MORAL HAZARD NONPERFORMING LOANS OFF BALANCE SHEET OFF BALANCE SHEET EXPOSURES PORTFOLIO PORTFOLIO RISK PORTFOLIOS PRIVATE BANKS PRIVATE CREDIT PRIVATE CREDIT BUREAU PUBLIC CREDIT PUBLIC REGISTRY RATING AGENCIES REAL SECTOR REGULATORY STANDARDS REORGANIZATION RESERVES RISK ADJUSTED ASSETS RISK EXPOSURE RISK FACTORS RISK MANAGEMENT RISK MEASUREMENT RISK TAKING RISK WEIGHTED ASSETS SAFETY NET SAFETY NETS SECURITIZATION SHAREHOLDER SHAREHOLDERS STATE GUARANTEES STOCK MARKET STOCK MARKET CAPITALIZATION STOCK MARKETS STOCK RETURNS SUBORDINATED DEBT SUPERVISORY AGENCY SUPERVISORY AUTHORITIES SUPERVISORY AUTHORITY SUPERVISORY POWER SYNCHRONOUS STOCK PRICE MOVEMENTS SYSTEMIC BANKING CRISES SYSTEMIC RISK T-BILL T-BILL RATE TANGIBLE ASSETS TIER 1 CAPITAL TIER 2 CAPITAL TRANSPARENCY TREASURY TREASURY YIELD VALUATION VALUE OF ASSETS This paper distinguishes among various types of capital and examines their effect on system-wide fragility. The analysis finds that higher quality forms of capital reduce the systemic risk contribution of banks, whereas lower quality forms can have a destabilizing impact, particularly during crisis periods. The impact of capital on systemic risk is less pronounced for smaller banks, for banks located in countries with more generous safety nets, and in countries with institutions that allow for better public and private monitoring of financial institutions. The results show that regulatory capital is effective in reducing systemic risk and that regulatory risk weights are correlated with higher future asset volatility, but this relationship is significantly weaker for larger banks. The paper also finds that increased regulatory risk-weights not correlated with future asset volatility increase systemic fragility. Overall, the results are consistent with the theoretical literature that emphasizes capital as a potential buffer in absorbing liquidity, information, and economic shocks reducing contagious defaults. 2014-08-15T18:27:03Z 2014-08-15T18:27:03Z 2014-06 http://documents.worldbank.org/curated/en/2014/06/19731166/bank-capital-systemic-stability http://hdl.handle.net/10986/19377 English en_US Policy Research Working Paper;No. 6948 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research |