Formulas or Supervision? Remarks on the Future of Regulatory Capital
10 Pages Posted: 15 Nov 2007
Date Written: October 1998
The author focuses on the relative emphasis that the structure of regulatory capital places on formulas and on supervision. The two are not viewed as mutually exclusive, but as elements to which capital policy implicitly assigns relative weights. He shows that in U.S. regulatory practice, these weights have shifted over time, not always in the same direction. Furthermore, he explores the relationships among regulatory formulas, supervisory appraisals, and the prevailing business practices in the banking industry.
Keywords: capital regulation
JEL Classification: G2, G3
Suggested Citation: Suggested Citation