Taylor Begley, Amiyatosh Purnanandam, Kuncheng Zheng, Friday, May 8, 2015 - 00:00

A key regulatory response to the Global Crisis has involved higher risk-weighted capital requirements. This column documents systematic under-reporting of risk by banks that gets worse when the system is under stress. Thus banks’ self-reported levels of risk are least informative in states of the world when accurate risk measurement matters the most.

Xavier Vives, Tuesday, March 17, 2015 - 00:00

Piotr Danisewicz, Dennis Reinhardt, Rhiannon Sowerbutts, Thursday, March 5, 2015 - 00:00

Jon Danielsson, Eva Micheler, Katja Neugebauer, Andreas Uthemann, Jean-Pierre Zigrand, Monday, February 23, 2015 - 00:00

Philippe Karam, Ouarda Merrouche, Moez Souissi, Rima Turk, Monday, February 2, 2015 - 00:00

Xavier Vives, Monday, December 22, 2014 - 00:00

Stephen Cecchetti, Wednesday, December 17, 2014 - 00:00

Stephen Cecchetti, Wednesday, December 17, 2014 - 00:00

Christian Thimann, Friday, October 17, 2014 - 00:00

Patricia Jackson, Monday, October 13, 2014 - 00:00

Christian Thimann, Friday, October 10, 2014 - 00:00

Olivier Blanchard, Friday, October 3, 2014 - 00:00

Jonathan Bridges, David Gregory, Mette Nielsen, Silvia Pezzini, Amar Radia, Marco Spaltro, Tuesday, September 2, 2014 - 00:00

Harold Cole, Thomas F Cooley, Sunday, June 22, 2014 - 00:00

In the aftermath of the sub-prime crisis, the major credit rating agencies have been criticised for giving overly generous ratings to mortgage-backed securities. Whereas many commentators have blamed the ‘issuer pays’ market structure for distorting incentives, this column argues that the key distortion came from regulators’ use of private ratings to assign risk weights. This induced investors to focus on the risk weights attached to ratings rather than their information content, thus undermining the reputation mechanism that had previously kept ratings honest.

Paolo Angelini, Giuseppe Grande, Tuesday, April 8, 2014 - 00:00

The ‘deadly embrace’ between banks and their government has strengthened with the EZ Crisis. This column argues that this has mostly been consequence rather than a cause of the Crisis. Moreover, adverse bank-sovereign negative feedback depends on the economy-wide effects of the sovereign risk, not just the banks’ direct exposure. Loosening the embrace requires sound public finances and well-capitalized, well-supervised banks – including the banking union project.

Joseph Noss, Priscilla Toffano, Sunday, April 6, 2014 - 00:00

The impact of tighter regulatory capital requirements during an economic upswing is a key question in macroprudential policy. This column discusses research suggesting that an increase of 15 basis points in aggregate capital ratios of banks operating in the UK is associated with a median reduction of around 1.4% in the level of lending after 16 quarters. The impact on quarterly GDP growth is statistically insignificant, a result that is consistent with firms substituting away from bank credit and towards that supplied via bond markets.

Jens Hagendorff, Francesco Vallascas, Monday, December 16, 2013 - 00:00

Recent research shows that capital requirements are only loosely related to a market measure of bank portfolio risk. Changes introduced under Basel II meant that banks with the riskiest portfolios were particularly likely to hold insufficient capital. Banks that relied on government support during the crisis appeared to be well-capitalised beforehand, suggesting they engaged in capital arbitrage. Until the regulatory concept of risk better reflects actual risk, the proposed increases in risk-weighted capital requirements under Basel III will have little effect.

Charles W Calomiris, Thursday, November 28, 2013 - 00:00

There is widespread agreement that government protection of banks contributed to the financial crisis, leading to proposals to require banks to finance a larger share of their portfolios with equity instead of debt – thus forcing shareholders to absorb losses instead of taxpayers. This column argues that equity ratios relative to asset risk are what matter, not equity ratios per se. Although higher equity requirements for banks may be desirable, the costs of reduced loan supply should be taken into account.

Thorsten Beck, Tuesday, October 25, 2011 - 00:00

For better or worse, banking is back in the headlines. From the desperate efforts of crisis-struck Eurozone governments to the Occupy Wall Street movement currently spreading across the globe, the future of banking is hotly debated. This VoxEU.org eBook presents a collection of essays by leading European and American economists that discuss both immediate solutions to the on-going financial crisis and medium- to long-term regulatory reforms.

Viral Acharya, Matthew Richardson, Tuesday, October 25, 2011 - 00:00

Macroprudential regulation aims to reduce systemic risk by correcting the negative externalities caused by breakdowns in financial intermediation. This column describes the shortcomings of the Dodd-Frank legislation as a piece of macroprudential regulation. It says the Act’s ex post charges for systemic risk don’t internalise the negative externality and its capital requirements may be arbitrary and easily gamed.


CEPR Policy Research