Optimal Bank Capital

37 Pages Posted: 27 Feb 2013  

David Miles

Imperial College Business School; The Bank of England; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Jing Yang

Government of Canada - Bank of Canada

Gilberto Marcheggiano

Goldman Sachs Group, Inc. - Goldman Sachs Asset Management

Multiple version iconThere are 2 versions of this paper

Date Written: March 2013

Abstract

This article reports estimates of the long‐run costs and benefits of having banks fund more of their assets with loss‐absorbing capital, or equity. We model how shifts in funding affect required rates of return and how costs are influenced by the tax system. We draw a clear distinction between costs to individual institutions (private costs) and overall economic (or social) costs. We find that the amount of equity capital that is likely to be desirable for banks to use is very much larger than banks have used in recent years and also higher than targets agreed under the Basel III framework.

Suggested Citation

Miles, David and Yang, Jing and Marcheggiano, Gilberto, Optimal Bank Capital (March 2013). The Economic Journal, Vol. 123, Issue 567, pp. 1-37, 2013. Available at SSRN: https://ssrn.com/abstract=2225652 or http://dx.doi.org/10.1111/j.1468-0297.2012.02521.x

David Kenneth Miles

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom

The Bank of England ( email )

Threadneedle Street
London EC2R 8AH
United Kingdom

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Yang Jing

Government of Canada - Bank of Canada ( email )

234 Wellington Street
Ontario, Ottawa K1A 0G9
Canada

Gilberto Marcheggiano

Goldman Sachs Group, Inc. - Goldman Sachs Asset Management ( email )

200 West Street
New York, NY 10282
United States

Paper statistics

Downloads
2
Abstract Views
1,289