Bank capital requirements: Risk weights you cannot trust and the implications for Basel III

Jens Hagendorff, Francesco Vallascas, 16 December 2013

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One of the primary purposes of bank capital is to absorb losses. Where bank capital holdings are insufficient to absorb losses, banks will either fail or – if bank failure is deemed too costly for the economy – be bailed out. In practice, banks frequently receive public funds where capital holdings are insufficient to cover losses in order to prevent bank failure.

Topics: Financial markets, Microeconomic regulation
Tags: bank capital, Basel, Basel II, BASEL III, capital adequacy, capital requirements, financial crisis, risk weighting

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