Capital Study Report: Use of Market Discipline

198 Pages Posted: 7 Nov 2015

Date Written: January 10, 2014


This report by Hal S. Scott and the staff of the Committee on Capital Markets Regulation examines a balanced approach to capital regulation that enhances private market discipline while strengthening the complementary role of government-imposed capital requirements. A regulatory approach that recognizes the dual roles of government and the private market in setting appropriate capital levels at financial institutions will result in a stronger and safer financial system than can be achieved through public regulation alone. The approaches outlined in this paper will achieve the desired goal of a more robust financial system.

Keywords: bank regulation, contingent claims, CoCo bonds, capital requirements, leverage, systemic risk

JEL Classification: G21, G28, G20, G18, G13

Suggested Citation

Scott, Hal S., Capital Study Report: Use of Market Discipline (January 10, 2014). Available at SSRN: or

Hal S. Scott (Contact Author)

Harvard Law School ( email )

1557 Massachusetts Avenue
Cambridge, MA 02138
United States
617-495-4590 (Phone)
617-495-9593 (Fax)

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