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

43 Pages Posted: 7 Oct 2015  

Thomas L. Hogan

Troy University

Neil R. Meredith

West Texas A&M University; American Economic Association

Date Written: October 6, 2015


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:

Thomas Hogan (Contact Author)

Troy University ( email )

Troy, AL
United States

Neil Meredith

West Texas A&M University ( email )

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

American Economic Association ( email )

2014 Broadway, Suite 305
Nashville, TN 37203
United States

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