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Bank Capital and Systemic Stability / Deniz Anginer
World Bank Open Knowledge Repository (formerly "World Bank E-Library Publications") Available online
View online- Format:
- Book
- Government document
- Author/Creator:
- Anginer, Deniz
- Series:
- Policy research working papers.
- World Bank e-Library.
- Language:
- English
- Subjects (All):
- Access to Finance.
- Bank Capital.
- Banking Law.
- Banks and Banking Reform.
- Basel Capital.
- Debt Markets.
- Default.
- Distance to Default.
- Finance and Financial Sector Development.
- Financial Intermediation.
- Law and Development.
- Merton Model.
- Systemic Risk.
- Local Subjects:
- Access to Finance.
- Bank Capital.
- Banking Law.
- Banks and Banking Reform.
- Basel Capital.
- Debt Markets.
- Default.
- Distance to Default.
- Finance and Financial Sector Development.
- Financial Intermediation.
- Law and Development.
- Merton Model.
- Systemic Risk.
- Physical Description:
- 1 online resource (42 pages)
- Place of Publication:
- Washington, D.C., The World Bank, 2014
- System Details:
- data file
- Summary:
- This paper distinguishes among various types of capital and examines their effect on system-wide fragility. The analysis finds that higher quality forms of capital reduce the systemic risk contribution of banks, whereas lower quality forms can have a destabilizing impact, particularly during crisis periods. The impact of capital on systemic risk is less pronounced for smaller banks, for banks located in countries with more generous safety nets, and in countries with institutions that allow for better public and private monitoring of financial institutions. The results show that regulatory capital is effective in reducing systemic risk and that regulatory risk weights are correlated with higher future asset volatility, but this relationship is significantly weaker for larger banks. The paper also finds that increased regulatory risk-weights not correlated with future asset volatility increase systemic fragility. Overall, the results are consistent with the theoretical literature that emphasizes capital as a potential buffer in absorbing liquidity, information, and economic shocks reducing contagious defaults.
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