Capital adequacy ratio: an agnostic viewpoint
By: Nachane, D.M.
Material type:
ArticlePublisher: 1999Description: p.155-60.Subject(s): Capital | Banks
In:
Economic and Political WeeklySummary: The main purpose of bank regulation is the maintenance of a sound banking system, which is usually narrowly interpreted to mean `prevention of bank failure'. To this end, regulators examine the riskiness of assets and the adequacy of capital. But do rigid capital adequacy ratios ensure adequate bank capitalisation in reality? Alternatives such as Value-at-Risk and Pre-Commitment models have been used in some developed countries. India needs theoretical analysis of these models and empirical data before it can consider a shift from the current capital regulatory arrangements. - Reproduced
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Articles
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Indian Institute of Public Administration | Volume no: 34, Issue no: 3-4 | Available | AR40439 |
The main purpose of bank regulation is the maintenance of a sound banking system, which is usually narrowly interpreted to mean `prevention of bank failure'. To this end, regulators examine the riskiness of assets and the adequacy of capital. But do rigid capital adequacy ratios ensure adequate bank capitalisation in reality? Alternatives such as Value-at-Risk and Pre-Commitment models have been used in some developed countries. India needs theoretical analysis of these models and empirical data before it can consider a shift from the current capital regulatory arrangements. - Reproduced
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