Optimal Leverage Ratio and Capital Requirements with Limited Regulatory Power

Ho-Mou Wu (First Author), Yue Zhao (Participant Author)

科研成果: 期刊稿件期刊论文

7 引用 (Web of Science)

摘要

This article discusses the optimal leverage ratio and capital requirements when asymmetric information exists between the bank and the regulator. We show that the optimal requirements take different forms in the short and long run. In either case, imposing the risk-weighted capital requirement without considering the incentives of the bank to misreport its risk profile is never optimal by itself. In the long run, the optimal requirements take the form of a leverage ratio requirement on top of the risk-weighted capital requirement. The add-on leverage ratio requirement, which serves as a compensation for the limited supervisory power of the regulators, should be set such that the risk-taking behavior of the bank is unchanged from the situation in which the regulator uses the risk-weighted capital requirement alone, and the misreporting incentive of the bank is eliminated by the add-on leverage ratio requirement.
源语言英语
页(从-至)2125-2150
期刊Review of Finance
20
6
DOI
已出版 - 2016

成果物的来源

  • FT
  • ABDC-A*
  • Scopus
  • SSCI

指纹

探究 'Optimal Leverage Ratio and Capital Requirements with Limited Regulatory Power' 的科研主题。它们共同构成独一无二的指纹。

引用此