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Bank Capital: A Seawall Approach

Jihad Dagher et al.

International Journal of Central Banking2020article
AJG 3ABDC A
Weight
0.52

Abstract

We find that bank capital in the range of 15-23 percent of risk-weighted assets would have been sufficient to absorb losses in the vast majority of historic banking crises in advanced economies. Further capital increases would have had only marginal effects on preventing additional crises. Appropriate capital requirements may be below this range, as banks tend to hold capital in excess of regulatory minimums, and other bail-in-able instruments can contribute to banks' loss-absorption capacity. While the long-term social costs associated with this level of capital appear acceptable, the short-term costs of transitioning to higher bank capital may be substantial, which calls for a careful timing of such transition.

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Cite this paper

@article{jihad2020,
  title        = {{Bank Capital: A Seawall Approach}},
  author       = {Jihad Dagher et al.},
  journal      = {International Journal of Central Banking},
  year         = {2020},
}

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Bank Capital: A Seawall Approach

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Evidence weight

0.52

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.44 × 0.4 = 0.17
M · momentum0.80 × 0.15 = 0.12
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

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