The Relationship between Bank Capital , Risk-Taking , and Capital Regulation : A Review of the Literature ∗

@inproceedings{Stolz2002TheRB,
  title={The Relationship between Bank Capital , Risk-Taking , and Capital Regulation : A Review of the Literature ∗},
  author={St{\'e}phanie Stolz},
  year={2002}
}
Bank capital regulation seems to be today’s most accepted regulatory instrument. The reasoning is that limited liability and deposit insurance appear to give banks incentives for excessive risktaking. Capital requirements can alleviate this problem as banks are obliged to hold more capital which forces them to have more of their own funds at risk. But the theoretical literature has much more to say on how banks determine their capital structure and portfolio risk and how capital regulation… CONTINUE READING