Bank Capital and Loan Loss Reserves Under Basel Ii: Implications for Emerging Countries

31 Pages Posted: 20 Apr 2016

See all articles by Giovanni Majnoni

Giovanni Majnoni

World Bank

Margaret Miller

World Bank

Andrew Powell

Inter-American Development Bank (IDB); Universidad Torcuato Di Tella - School of Business; Harvard University - Center for International Development (CID)

Date Written: October 21, 2004

Abstract

Majnoni, Miller, and Powell propose an integrated approach to minimum bank capital and loan loss reserves regulation. They break new ground in two main areas. First, the authors provide an explicit measurement of the credit loss distribution for a sample of emerging countries providing a benchmark for discussing the appropriate calibration of new regulatory capital and loan loss provision requirements for non-G10 countries. Second, on normative grounds, they propose a simplified version of the "internal rating based" (IRB) approach as a transition tool that, while retaining a risk-based definition of solvency ratios, implies reduced supervisory monitoring costs and could therefore be of interest to emerging countries where supervisory resources are particularly scarce.

This paper - a product of the Finance Cluster Sector Unit, Latin America and the Caribbean Region - is part of a larger effort in the region to analyze the effects of bank capital regulation.

Keywords: Bank regulation, solvency ratios, loan loss reserves, emerging economies

JEL Classification: G21, G28

Suggested Citation

Majnoni, Giovanni and Miller, Margaret and Powell, Andrew P. and Powell, Andrew P., Bank Capital and Loan Loss Reserves Under Basel Ii: Implications for Emerging Countries (October 21, 2004). Available at SSRN: https://ssrn.com/abstract=625315

Giovanni Majnoni (Contact Author)

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States
202-458-7542 (Phone)
202-522-2106 (Fax)

HOME PAGE: http://www.worldbank.org/research/interest/intrstweb.htm

Margaret Miller

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Andrew P. Powell

Inter-American Development Bank (IDB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

Universidad Torcuato Di Tella - School of Business ( email )

Saenz Valiente 1010
C1428BIJ Buenos Aires
Argentina
+5411 4787-9349 (Phone)
+5411 4783-3220 (Fax)

Harvard University - Center for International Development (CID) ( email )

One Eliot Street Building
79 JFK Street
Cambridge, MA 02138
United States

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