The Failure of Risk-Based Capital Regulation
Mercatus on Policy, No. 120, 2013
4 Pages Posted: 8 Feb 2013
Date Written: January 31, 2013
In this policy brief, we explain the fundamentals of risk-based capital (RBC) regulation and discuss some potential shortcomings of this system. We propose that the Fed end its use of RBC regulation and return to the use of simple capital ratios as measures of bank risk.
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