Bank Capital Regulations Around the World: What Explains the Differences?

Kara, Gazi İshak

doi:10.17016/feds.2016.057

Cited by 13 publications

(13 citation statements)

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“…The index therefore takes values between 0 and 9, and higher values of the index correspond to greater stringency of bank capital regulations. See Kara (2016) and Schaeck and Čihák (2012) for a similar approach.…”

Section: Notesmentioning

confidence: 99%

Risk and capital in Indonesian large banks

Raz

2018

JFEP

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Purpose The purpose of this paper is to examine the behavior of banking risk in the emerging economies, particularly Indonesia and contribute to the discussion on the existing policy debate regarding the impact of capital on bank risk. Design/methodology/approach This study investigates the relationship between bank risk and capital using data on 15 Indonesian large banks between 2008 and 2015, using z-score and Delta-CoVaR to measure both idiosyncratic and systemic risks. Findings The empirical investigation suggests that capital has a negative and significant relationship with these risk measures. The authors also find that higher systemic risk encourages banks to increase their capital. However, similar evidence is not found in the idiosyncratic risk models. Finally, the role of capital in reducing risk is considered robust only during the normal periods, as banks may increase their assets risk during times of financial distress. Originality/value Systemic risk (CoVaR) is used to represent bank risk. This study focuses on the Indonesian banking sector (capture institutional arrangements and regulatory environment). It covers the period of 2008 GFC and post-crisis period.

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Section: Notesmentioning

confidence: 99%

Risk and capital in Indonesian large banks

Raz

2018

JFEP

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“…Let s ≡ R A -R B N 0. Then for any R A , there exists ŝ ∈ (0, R A -1) Kara (2015) for an empirical assessment of this prediction. 33 I adjust the Concavity assumption in this section by letting F ′ (0) ≤ R B = min {R A , R B }-that is, global investors are less productive than banks in both countries.…”

Section: Asymmetric Countriesmentioning

confidence: 99%

Systemic risk, international regulation, and the limits of coordination

Kara

2016

Journal of International Economics

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a b s t r a c tThis paper examines the incentives of national regulators to coordinate capital adequacy requirements in the presence of systemic risk in global financial markets. In a two-country model, correlated asset fire sales by banks generate systemic risk across national financial markets. Absent coordination, national regulators choose inefficiently low levels of macro-prudential regulation. Thus, symmetric countries always benefit from relinquishing their authority to a central regulator that establishes uniform regulations across countries. I also consider the separate case of asymmetric countries: while there is a limit to coordination when countries are sufficiently asymmetric in a single dimension, existence of asymmetries in multiple dimensions might actually relax this limit or even eliminate it.Published by Elsevier B.V.JEL classification: F36 G15 G18 G21

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“…Kara (2016) uses the years since the last systemic banking crisis to explain changes in the stringency of capital regulation.Masciandaro and Romelli (2018) find that recent episodes of systemic banking crisis significantly increase the likelihood that a country reforms its supervisory structure.…”

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confidence: 99%