Robust Capital Regulation

  title={Robust Capital Regulation},
  author={Hamid Mehran and Til Schuermann and Anjan Thakor},
Regulators and markets can find the balance sheets of large financial institutions difficult to penetrate, and they are mindful of how undercapitalization can create incentives to take on excessive risk. This study proposes a novel framework for capital regulation that addresses banks’ incentives to take on excessive risk and leverage. The framework consists of a special capital account in addition to a core capital requirement. The special account would accrue to a bank’s shareholders as long… CONTINUE READING
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