Good corporate governance is bad for bank capitalisation

Deniz Anginer, Asli Demirgüç-Kunt, Harry Huizinga, Kebin Ma 10 November 2013

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A failing bank can be defined as one that has insufficient capital. Bank capitalisation strategies thus are crucial in determining the probability of a bank failure. Confirming this, Berger and Bouwman (2013) find that higher levels of pre-crisis capital increase a bank’s probability of survival during a banking crisis. Beltratti and Stulz (2012) and Demirguc-Kunt, Detragiache and Merrouche (2013) find that banks that were better capitalised before the crisis had a better stock-market performance during the crisis.

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Topics:  Financial markets

Tags:  corporate governance, bank capitalisation, banks

Banks’ losses and capital: The new version of the paradox of Achilles and the tortoise

Marco Onado 19 August 2008

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One of the most important lessons from the subprime crisis is that the growth of banks’ capital fell behind the dramatic growth of total credit and overall risks over the last twenty years. Until August 2007, we were not alarmed by this, having been lulled by the comforting hypothesis that the risks were sold outside the banking system and widely spread over many investors.

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Topics:  Financial markets

Tags:  subprime crisis, bank capitalisation