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Title:Liquidity and capital requirements and the probability of bank failure PDF Logo
Authors:König, Philipp Johann
Issue Date:2010
Series/Report no.:SFB 649 discussion paper 2010,027
Abstract:Using the model of Rochet and Vives (2004), this note shows that a prudential regulator can in general not mitigate a bank's failure risk solely by means of liquidity requirements. However, their effectiveness can be restored if, in addition, minimum capital requirements are met. This provides a rationale for capital requirements beyond the commonly envoked reasoning that they are to be used to control the riskiness of banks' asset portfolios.
Subjects:prudential regulation
liquidity requirements
minimum capital requirements
global games
JEL:G21
G28
Document Type:Working Paper
Appears in Collections:SFB 649 Discussion Papers, HU Berlin

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