The Leverage Ratio as a Bank Discipline Device

Revue Economique, Forthcoming

10 Pages Posted: 30 Dec 2010  

Clovis Rugemintwari

Université de Limoges, LAPE

Date Written: November 1, 2010

Abstract

This paper investigates bank portfolio composition under Basel II where the amount of required capital is determined by bank’s own risk assessment. We particularly show that in presence of asymmetric information between the bank and the supervisor, it has incentives to understate its risk taking which could be curbed by the addition of the simple leverage ratio as suggested in Basel III.

Keywords: Basel II, Basel III, Leverage Ratio, Portfolio Allocation, Information Asymmetries

JEL Classification: G21, G28, G32

Suggested Citation

Rugemintwari, Clovis, The Leverage Ratio as a Bank Discipline Device (November 1, 2010). Revue Economique, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1731882

Clovis Rugemintwari (Contact Author)

Université de Limoges, LAPE ( email )

5 rue Félix Eboué BP3127
LIMOGES, 87031
France

HOME PAGE: http://www.unilim.fr/lape/staff/full-time/article/clovis-rugemintwari

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