Rebalancing the 3 Pillars of Basel 2 ∗


This paper develops a formal model of banking regulation where the interactions between the 3 pillars of Basel 2 can be analyzed. It also provides a formal analysis of the mandatory subdebt proposal and shows that, under certain conditions, Pillar 1 (solvency ratio) and Pillar 3 (market discipline) are partially substitutable. The same is true for Pillar 2… (More)


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