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  • 标题:Bank Interest Margin and Default Risk under the Capped Schedule for Government Capital Injections in the Basel III Capital Adequacy Accord
  • 本地全文:下载
  • 作者:Chuen-Ping Chang ; Jeng-Yan Tsai
  • 期刊名称:Journal of Applied Finance and Banking
  • 印刷版ISSN:1792-6580
  • 电子版ISSN:1792-6599
  • 出版年度:2013
  • 卷号:3
  • 期号:1
  • 出版社:Scienpress Ltd
  • 摘要:

    The Basel III Capital Adequacy Accord (BCAA) will cap government capital injections as qualifying capital at 90% of the nominal amount of such capital outstanding, beginning in 2013, and the cap will decline by 10% during each subsequent year (Eubanks, 2010); this cap is called a capped ratio schedule of government capital instruments. We add to the literature on government capital injections by providing an option-based illustration of how the capped ratio schedule can influence bank interest margins and failure probability. We show that a declining capped ratio increases a bank’s volume of lending at a reduced margin and further increases its default risk. The capped ratio schedule as such makes the bank less prudent and more prone to risk-taking, thereby adversely affecting the stability of the banking system. Our findings provide alternative explanations for criticisms of BCAA.

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