The Basel Capital Accords and International Mortgage Markets: A Survey of the Literature

Allen, Linda

doi:10.1111/j.0963-8008.2004.00001.x

Cited by 50 publications

(47 citation statements)

References 169 publications

(241 reference statements)

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“…Similar to the analysis of mandatory deferral of compensation, the theoretical literature on the impact of capital requirements on risk-shifting finds countervailing effects (see the overviews in Bhattacharya et al (1998) and Allen (2004)). Allen et al (2011) develop a model to explain why banks often hold capital above the regulatory minimum requirements.…”

Section: Introductionmentioning

confidence: 90%

Bank capital requirements and mandatory deferral of compensation

Feess

Wohlschlegel²

2018

J Regul Econ

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Tighter capital requirements and mandatory deferral of compensation are among the most prominently advocated regulatory measures to reduce excessive risk-taking in the banking industry. We analyze the interplay of the two instruments in an economy with two heterogenous banks that can fund uncorrelated projects with fully diversifiable risk or correlated projects with systemic risk. If both project types are in abundant supply, we find that full mandatory deferral of compensation is beneficial as it allows for weaker capital requirements, and hence for a larger banking sector, without increasing the incentives for risk-shifting. With competition for uncorrelated projects, however, deferred compensation may misallocate correlated projects to the bank which is inferior in managing risks. Our findings challenge the current tendency to impose stricter regulations on more sophisticated institutes.

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Section: Introductionmentioning

confidence: 90%

Bank capital requirements and mandatory deferral of compensation

Feess

Wohlschlegel²

2018

J Regul Econ

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“…The higher volatility of exchange rates, interest rates and asset prices after the end of the Bretton Woods agreement not only gave room for hedge operations in the derivatives market, but particularly for speculation and arbitrage operations, due to the low initial margin requirements, either as cash deposited into accounts or securities (Farhi, 1999). Regarding the new processes, it is important to highlight securitization, which enabled a whole spectrum of "originate-to-distribute" operations and thus the transformation of non-marketable assets into marketable assets in different types of financial markets (Bord, Santos, 2012;Allen, 2004;Kregel, 2007) 7 .…”

Section: From the End Of The Bretton Woods Agreement To Financializedmentioning

confidence: 99%

For a political economy of financialization: theory and evidence

et al. 2017

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The end of the Bretton Woods agreement led not only to changes in the international economic relations, but also in the very way in which capitalism functions. The liberalization of capital flows and deregulation and integration of financial markets under US leadership gave rise to a new systemic pattern of wealth, financialization, in which operations with financial assets received increased importance in the management of wealth by households and enterprises, and not only by banks and the other financial market institutions. Unlike most recent interpretations of this phenomenon, this one does not indicate a tendency of the system towards stagnation, but rather an increase in the instability that characterizes it, reinforcing the moments of expansion, contraction, as well as leading to crises. In fact, with the generalization and the dominance of finance, borrowing and spending decisions by enterprises and households are now increasingly responsible for current and expected fluctuations in the stock of wealth, which in turn are responsive to current and expected fluctuations in the prices of financial assets. This implies a transformation in the relationship between the state and the market, with central banks and national treasures becoming hostage to the need to prevent private losses and the perverse effects they may exercise over output, income and employment levels of the economy.Keywords: Financialization; Contemporary capitalism; Economic dynamic; Instability; Inequality. ResumoPor uma economia política da financeirização: teoria e evidências O fim do arranjo de Bretton Woods ensejou não apenas uma mudança na forma de funcionamento das relações econômicas em âmbito mundial, mas também no próprio modo de operação do capitalismo. A liberalização dos fluxos de capitais e a desregulamentação e integração dos mercados financeiros internacionais sob a liderança dos Estados Unidos deu origem a um novo padrão sistêmico de riqueza, a financeirização, em que as operações financeiras ganham importância cada vez maior na gestão de ativos e passivos por parte das famílias e das empresas, e não apenas de instituições do mercado financeiro. Ao contrário do que sugerem interpretações mais recentes sobre esse fenômeno, isso não significa uma tendência do sistema à estagnação, mas um aumento da sua instabilidade característica, reforçando os momentos de expansão, mas também de contração. De fato, com a generalização e a  Article received on April 10, 2017 and approved on September 18, 2017. ** Professors at the Institute of Economics -University of Campinas, Campinas, SP, Brazil. E-mails: bragajcs@uol.com.br; giulianoliveira@gmail.com; alex.wilhans@gmail.com; simonededeos@gmail.com. *** PhD student in Economics at the Institute of Economics -University of Campinas, Campinas, SP, Brazil. E-mail: paulowwolf@gmail.com. dominância da lógica financeira as decisões de endividamento e de gasto das empresas e das famílias passaram a ser crescentemente sensíveis às oscilações correntes e esperadas nos estoques de riqueza,...

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“…If C is invested, Bank A acquires an internal rating system (IRS) that is sufficient to qualify for the use of internal ratings (IRB) under the Basel II Accord. 3 If Bank A invests C, it has the option to submit its IRS to the regulator, who can verify the quality of the IRS and will grant approval to Bank A to operate as an IRB-bank. Note that, for simplicity, only Bank A has an option to invest and to become an IRB-bank.…”

Section: The Modelmentioning

confidence: 99%

“…Our paper is related to the vast literature on bank capital and its optimal regulation and more specifically, to the numerous papers on risk-taking by banks and the regulation of bank capital (see Bhattacharya, Boot and Thakor, 1998, Santos, 2001, and Allen, 2004, for surveys). Acharya (2001) endogenizes the choice of systemic risk in a bank loan portfolio and discusses the regulatory consequences.…”

Section: Introductionmentioning

confidence: 99%