Paper: Risk and Risk-Based Capital of U.S. Bank Holding Companies
The following is a newly released paper by Dr. Thomas Hogan, former Sound Money Project fellow and current Chief Economist for the U.S. Senate Committee on Banking, Housing, & Urban Affairs.
Risk and Risk-Based Capital of U.S. Bank Holding Companies
Thomas L. Hogan
Troy University
Neil R. Meredith
West Texas A&M University; American Economic Association
October 6, 2015
Journal of Regulatory Economics, Forthcoming
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.
Source: http://soundmoneyproject.org/2015/10/paper-risk-and-risk-based-capital-of-u-s-bank-holding-companies/
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