The value of bank capital buffers in maintaining financial system resilience

Bui, Christina; Scheule, Harald; Wu, Eliza

doi:10.1016/j.jfs.2017.10.006

Cited by 29 publications

(12 citation statements)

References 42 publications

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“…Fonseca & González (2010) indicated in their analysis that banks need to keep capital above minimum set levels due to market discipline, by reason of expectations of quasi-earnings (shareholders are interested that the bank has enough capital to prevent operating losses) and the third reason is the need to adjust to the capital requirements set by the regulator. Higher capital requirements indicate better soundness and safety of a bank (Chen et al, 2014), they are built up in an expansion phase and are used during a recession (Drehmann et al, 2010;Heid & Krüger, 2011;Montagnoli et al, 2018), increase stability and resilience of financial system (Noreen, Alamdar & Tariq, 2016) and maintain financial system resilience (Bui et al, 2017). Besides the aforementioned, it is equally important to access the influence of capital buffers on level of risk (especially credit risk), supervisory discipline, impact on insurance buffer, economic growth, and competition between financial institutions (Lindquist, 2003).…”

Section: Literature Reviewmentioning

confidence: 99%

Analysis of capital buffers in Serbia

Martin¹

2021

Anali Ekon fak Subotica

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The aim of this paper is to analyse all capital buffers that are currently applied in Serbia. Regulation that transposes Basel III regulatory standards in Serbia was adopted in December 2016. These buffers increase the resilience of banks to losses, reduce excessive or underestimated exposures and restrict the distribution of capital. An assessment of the long-term trend of the credit-to-GDP ratio is based on using a one-sided Hodrick-Prescott filter and the selected value of the parameter l equals 400000. Also, this paper used the following methods of research: inductive and deductive methods, methods of analysis and synthesis, classification method and the method of comparison. Analysis has shown that capital buffers that are currently applied in Serbia are fully harmonized with European Union regulations and international best practices.

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Section: Literature Reviewmentioning

confidence: 99%

Analysis of capital buffers in Serbia

Martin¹

2021

Anali Ekon fak Subotica

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“…Bui, Scheule & Wu [19] draw attention to the controversy concerning the appropriate size of banks' capital requirements, and the trade-off between the costs and benefits of implementing higher capital requirements. The authors suggest that a moderate increase in bank capital buffers is sufficient to maintain financial system resilience, since credit supply may be hampered if bank capital levels are too high.…”

Section: Literature Reviewmentioning

confidence: 99%

Reserve Capital buffer as an Instrument of Macroprudential Policy

Господарчук

2019

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The analysis of Basel III main provisions shows that within the macroprudential policy, increasing the financial stability of the banking sector is achieved by growing the capital of banks and creating new tools to solve short-term liquidity problems. The proposed measures seem well developed, except one fact — the quantitative values of the regulatory requirements for growing the bank capital are insufficient to achieve the macroprudential policy objectives. This study aims to develop analytical tools allowing to form quantitative objectives of the macroprudential policy and to deliver them by streamlining the capital requirements of banks. The methods of comparative and GAP analyses were used in the study. The empirical analysis was performed with the data on the Russian stock index IMOEX dynamics, the data from the reports by the Bank of Russia and financial reports of systemically important Russian banks. According to the study results, a quantitative strategic objective of the macroprudential policy in the Russian Federation was determined, a gradual increase in the capital adequacy ratio of Russian banks to 40% was proposed, a calendar plan was developed to achieve the strategic objective stagewise in 10 years, and banks are realistic in achieving this objective. As a regulatory instrument to grow the capital adequacy of banks according to the target level, it is proposed to use an additional regulatory capital requirement in the form of a reserve buffer of a dynamic and adaptive nature. The empirical analysis of the possibilities and consequences of a new regulatory instrument application proved the expediency of its introduction to improve the effectiveness of the macroprudential policy in the Russian Federation.

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“…Auer et al (2022) find that additional capital requirements resulting from the activation of the CCyB are associated with higher growth in banks' commercial lending. Therefore, in addition to the minimum common equity requirement and the Capital Conservation Buffer (CCB), banks are also required to satisfy sufficient countercyclical capital buffers to sustain lending during a crisis and to maintain financial system resilience (Benetton et al, 2021;Bui et al, 2017;Bennani et al, 2014). The amount that banks are required to hold will ultimately depend on whether systemic risks are rising or declining (Jahn and Pirovano, 2019).…”

Section: Introductionmentioning

confidence: 99%