Risk and Risk-Based Capital of U.S. Bank Holding Companies

43 Pages Posted: 7 Oct 2015

See all articles by Thomas L. Hogan

Thomas L. Hogan

American Institute for Economic Research

Neil R. Meredith

West Texas A&M University

Date Written: October 6, 2015

Abstract

This paper analyzes banks’ capital and risk-based capital (RBC) ratios as predictors of risk. Using quarterly data on U.S. bank holding companies (BHCs) from 1997 through 2010, we regress the capital and RBC ratios against six balance-sheet and market-based indicators of risk. Although both the capital and RBC ratios are statistically significant predictors of BHCs’ levels of risk, we find the capital ratio is a statistically significantly better predictor of risk than the RBC ratio. This difference is strongest since the recent financial crisis beginning in 2007.

Keywords: Bank, Capital, Risk-based capital, Risk, Regulation, Federal Reserve

JEL Classification: G21, G28, G32

Suggested Citation

Hogan, Thomas L. and Meredith, Neil R., Risk and Risk-Based Capital of U.S. Bank Holding Companies (October 6, 2015). Journal of Regulatory Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2670025

Thomas L. Hogan (Contact Author)

American Institute for Economic Research ( email )

PO Box 1000
Great Barrington, MA 01230
United States

Neil R. Meredith

West Texas A&M University ( email )

2501 4th Avenue
WTAMU Box 60187
Canyon, TX 79016-0001
United States
806-651-2493 (Phone)

HOME PAGE: http://https://www.wtamu.edu/academics/neil-meredith-bio.aspx

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