Formulas or Supervision? Remarks on the Future of Regulatory Capital

10 Pages Posted: 15 Nov 2007

Date Written: October 1998

Abstract

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

Estrella, Arturo, Formulas or Supervision? Remarks on the Future of Regulatory Capital (October 1998). Economic Policy Review, Vol. 4, No. 3, October 1998, Available at SSRN: https://ssrn.com/abstract=1030068 or http://dx.doi.org/10.2139/ssrn.1030068
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