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Title: Bank capital management
Author: Jokipii, Terhi Katariina
ISNI:       0000 0004 2682 2387
Awarding Body: City University London
Current Institution: City, University of London
Date of Award: 2009
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The work undertaken in this study empirically explores the determinants of regulatory bank capital buffers, and how they influence bank decisions. Focusing on bank capital management under the Basel I framework, this thesis serves to address some of the concerns that have been voiced regarding the implementation of the new regulation (Basel II) and the broader economic effects that could result. In particular, the research chapters of this thesis examine the cyclical behavior of European bank capital buffers, the long run relationship between bank capital buffers and charter values, and the simultaneous adjustments of capital and risk. In each of the research chapters, we acknowledge the endogenous nature of the capital decision of a bank, and assume that banks will define an internally optimal probability of default (a function of risk and capital) to be managed over the long term. Adjustment costs, illiquid markets, together with the costs associated with a regulatory breach contribute as factors in a banks internal decision when setting a target capital ratio. Treating capital in this way, we note that it is the amount of capital held above the requirement that determines a banks attitude towards risk. Importantly, this work has shown that excessive risk taking is rarely a consequence of insufficient capital.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available
Keywords: HG Finance