|
EconStor >
Institut für Wirtschaftsforschung Halle (IWH) >
IWH-Diskussionspapiere, Institut für Wirtschaftsforschung Halle (IWH) >
Please use this identifier to cite or link to this item:
http://hdl.handle.net/10419/23729
|
| | |
| Title: | | Why do banks hold capital in excess of regulatory requirements? : A functional approach  |
| Authors: | | Dietrich, Diemo Vollmer, Uwe |
| Issue Date: | | 2004 |
| Series/Report no.: | | Diskussionspapiere / Institut fuer Wirtschaftsforschung Halle 192 |
| Abstract: | | This paper provides an explanation for the observation that banks hold on average a capital ratio in excess of regulatory requirements. We use a functional approach to banking based on Diamond and Rajan (2001) to demonstrate that banks can use capital ratios as a strategic tool for renegotiating loans with borrowers. As capital ratios affect the ability of banks to collect loans in a nonmonotonic way, a bank may be forced to exceed capital requirements. Moreover, high capital ratios may also constrain the amount a banker can borrow from investors. Consequently, the size of the banking sector may shrink |
| Subjects: | | incomplete contracts minimum capital requirements bank capital disintermediation pro-cyclicality |
| JEL: | | G21 G28 |
| Persistent Identifier of the first edition: | | urn:nbn:de:gbv:3:2-1555 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Publikationen von Forscherinnen und Forschern des IWH IWH-Diskussionspapiere, Institut für Wirtschaftsforschung Halle (IWH)
|
| Files in This Item:
| |
| File |
Description |
Size | Format |
| 192.pdf | | 229.52 kB | Adobe PDF |
|
| No. of Downloads:
| |
Counter Stats
|
| |
| | |
Download bibliographical data as:
BibTeX
|
| |
Share on:http://hdl.handle.net/10419/23729
|
Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.
|