bank capital – IMF Blog

A New Look at the Benefits and Costs of Bank Capital

By Jihad Dagher, Giovanni Dell’Ariccia, Luc Laeven, Lev Ratnovski, and Hui Tong

The appropriate level of bank capital and, more generally, a bank’s capacity to absorb losses, has been a contentious subject of discussion since the financial crisis. Larger buffers give bankers “skin in the game” helping to prevent excessive risk taking and absorb losses during crises. But, some argue, they might increase the cost of financial intermediation and slow economic growth.

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By IMFBlog| March 3rd, 2016|Finance, Financial Crisis, International Monetary Fund, U.S.|0 Comments

Good Governance Curbs Excessive Bank Risks

By Luis Brandão-Marques, Gaston Gelos, and Erik Oppers

The global financial crisis reminded us that banks often take risks that are excessive from society’s point of view and can damage the economy. In part, this is the result of the incentives embedded in compensation practices and of inadequate monitoring by stakeholders. Our analysis found the right policies could reduce banks risky behavior.

Our findings

In our latest Global Financial Stability Report we take stock of recent developments in executive pay, corporate governance, and bank risk taking, and conduct a novel empirical analysis.

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By IMFBlog| October 16th, 2014|Advanced Economies, Annual Meetings, Economic outlook, Economic research, Finance, Financial regulation, Fiscal policy, IMF, International Monetary Fund, Investment, Reform, Uncategorized|0 Comments

Strong Policy Action—The Essence of Restoring Global Economic Hope

The global economy has entered a dangerous new phase. The recovery has weakened considerably, and downside risks have increased sharply. Strong policies are urgently needed to improve the outlook and to reduce the risks. Growth, which had been strong in 2010, decreased in 2011. What was going on was the stalling of the two rebalancing acts—internal and external—which, as we have argued in many previous reports, are needed to deliver “strong, balanced, and sustainable growth.” This has been compounded by a sharp increase in financial volatility since the middle of the summer. These developments have, not surprisingly, led us to revise our forecasts down. In light of the low baseline and the high risks, strong policy action is of the essence. It has to rely on three main legs.

By IMFBlog| September 20th, 2011|Advanced Economies, Economic outlook, Economic research, Emerging Markets, IMF, International Monetary Fund, Low-income countries|14 Comments

Time Waits for No Man: How to Secure Financial Stability in 2011

So, where does the global financial system stand at the moment? Yes, we have witnessed improvements recently, but we are also observing a dichotomy between the economy and the financial system. While the global economic recovery has been continuing, financial stability is still at risk, because of a persistent lack of investor confidence in some advanced country sovereigns and their banking systems. In this post José Viñals reflects on the IMF’s updated assessment of global financial stability, including the key challenges that keep global financial stability at risk and the policies needed to meet these challenges.

By IMFBlog| January 25th, 2011|Economic Crisis, Financial Crisis, Financial regulation, International Monetary Fund|2 Comments

Categories

A New Look at the Benefits and Costs of Bank Capital

Good Governance Curbs Excessive Bank Risks

Strong Policy Action—The Essence of Restoring Global Economic Hope

Time Waits for No Man: How to Secure Financial Stability in 2011