Risky Bank Lending and Optimal Capital Adequacy Regulation

2011 ◽  
Author(s):  
Jaromir Benes ◽  
Michael Kumhof
Keyword(s):  
Bank Lending ◽  
Capital Adequacy ◽  
Optimal Capital ◽  
Capital Adequacy Regulation

Risky Bank Lending and Optimal Capital Adequacy Regulation

2011 ◽  
Vol 11 (130) ◽  
pp. 1 ◽  
Author(s):  
Jaromir Benes ◽  
Michael Kumhof ◽  
◽  
Keyword(s):  
Bank Lending ◽  
Capital Adequacy ◽  
Optimal Capital ◽  
Capital Adequacy Regulation

Agent-based modeling for benchmarking banking regulation regimes: Application for the CBDC

2021 ◽  
Vol 16 (4) ◽  
pp. 261-272
Author(s):  
Vladimir Nechitailo ◽  
Henry Penikas
Keyword(s):  
Banking Regulation ◽  
Agent Based Modeling ◽  
Capital Adequacy ◽  
Fractional Reserve Banking ◽  
Reserve Requirement ◽  
Agent Based ◽  
The Great Depression ◽  
Reserve Banking ◽  
Von Mises ◽  
Capital Adequacy Regulation

COVID-19 pandemic challenges the sustainability of the modern financial system. International central bankers claim that banks are solid. They have accumulated significant capital buffers. Those buffers should be further more augmented by 2027 in line with Basel III reforms. However, disregarding such a consecutive rise in the banking capital adequacy requirements, the US financial authorities undertook an unprecedented step. First time in the country history they lowered the reserve requirement to zero at the end of March 2020. Friedrich von Hayek demonstrated the fragility of the modern fractional reserve banking systems. Together with Ludwig von Mises (von Mises, 1978) he was thus able to predict the Great Depression of 1929 and explain its mechanics much in advance. Thus, we wish to utilize the agent-based modeling technique to extend von Hayek’s rationale to the previously unstudied interaction of capital adequacy and reserve requirement regulation. We find that the full reserve requirement regime even without capital adequacy regulation provides more stable financial environment than the existing one. Rise in capital adequacy adds to modern banking sustainability, but it still preserves the system remarkably fragile compared to the full reserve requirement. We also prove that capital adequacy regulation is redundant when the latter environment is in place. We discuss our findings application to the potential Central Bank Digital Currencies regulation.

scholarly journals Risk governance: Experience of Islamic banks

2015 ◽  
Vol 5 (2) ◽  
pp. 31-40
Author(s):  
Mat Rahim Siti Rohaya ◽  
Fauziah Mahat
Keyword(s):  
Risk Management ◽  
Corporate Governance ◽  
Structural Equation ◽  
Committee Member ◽  
Bank Lending ◽  
Capital Adequacy ◽  
Risk Governance ◽  
Islamic Banks ◽  
Loan Loss ◽  
Cross Sectional

Risk governance has evolved tremendously in the banking industry. Risk governance recommends the imperative roles of Chief Risk Officer (CRO) to oversee risk. This study explores risk governance influence over the Islamic banks performances. Multivariate analysis techniques measure simultaneously via Structural Equation Modelling (SEM). This study employed cross-sectional sample of 200 Islamic banks across 21 countries for the year 2014. To examine risk governance and Islamic banks performance, the study captures seventeen variables developed from risk management and corporate governance (ROA, ROE, Profit Margin, CRO, Shariah committee member, CEO, board size, remuneration meeting, credit rating, external audit, accounting standard, loan loss provision, capital adequacy ratio, total deposit ratio, GDP, central bank lending rate and inflation). The simulation result reveals, risk governance act as mediating variables towards Islamic banks performance. This study has practical and significance contribution for Islamic banks to understand risk governance, aligning with the fundamental risk management and corporate governance.

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