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Capital Adequacy Ratio Requirements And Bank Countermeasures

Posted on:2005-09-27Degree:MasterType:Thesis
Country:ChinaCandidate:H TangFull Text:PDF
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The capital in bank acts chiefly as a cushion to absorb risks, while the ultimate purpose of absorbing risks is certainly to sustain the solvency of itself, the indirect result of which is also very important-helping to protect the depositors and other ordinary creditors. And just because of the latter, it's of special importance for us to carefully research the problems on bank capital.However, bank itself and regulators, whoever they are, had been taken a dim understanding of &e above problems for a long time. Meantime, there was a continuous deteriorate phenomenon that the ratio of bank capital to asset was declining all through. According to the statistic data of American banks, the ratio was very high to be about 55% in 1840, while this figure actually fell to be 3.70% in December of 1978! Besides, the huge loss and economic shocks brought about by the S&L crisis in the U.S and the debt crisis in Latin America since then compelled people of that time to begin to think about many problems, such as, what's on earth the role of capital in banks? What is a necessary minimum level of capital adequacy requirement for banks? And they tried to find solutions.Under the background of increasingly deepening of financial liberalization and economic globalization from 1970s, in order to solve bank crisis and reconstruction of institution, some developed countries, especially the USA and UK, strengthened their capital adequacy requirement. What's more, the crazy overseas expanding of Japanese banks following the rapid grown up of Japanese economy and appreciation of Japanese Yen made other countries feel that they were at a competitive disadvantage, so these countries claimed that the playing field must be leveling internationally. The above entangling problems led to the introduction of the Basle Accord in 1988. It has been coordinating the international bank regulations by establishing a comparable and uniform basis internationally.' The idea behind the capital adequacy of the Basle Accord is to integrate bank protect and supervision, stress to infuse principle of risk measurement into bank system, control the risk of bank insolvency and then to prevent bank failure. Although its effectiveness and efficiency are still needed to be check by theory and practice, the charm of this idea has brought conviction to many countries to implement the capital adequacy requirement since 1980s.The authorities of bank regulation in China have attached more and more importance to the regulation of bank's capital adequacy. Although the capital requirement of Chinese commercial bank now bases mainly on the 1988 Accord and 1996 Amendment version, the Basle Committee has brought forward many new reform suggestions in these years, and these amendment and perfectness of 1988 Accord is not only a guide, but also bring pressure to us. While what's the best choice of developing countries as the bank capital requirement is concerned, under the challenge of economic and financial globalization, meeting the international standards ortracking down the international convention is of no choice for the developing countries. So, the focus of this dissertation is to discuss the history development and future trend of bank capital requirement, then try to make some suggestions on what can be done for the domestic commercial banksThe structure of this dissertation is as follows:Chapter one is a basis for the whole dissertation. After introducing the reason and research methods of this dessertation, etc., the meanings of bank capital analyzed and a clear definition of capital adequacy is gived. Then and history development is discussed.Chapter two presents the necessity and the influence of the requirement of bank capital adequacy. Firstly, what's on earth the effect of the requirement of bank capital adequacy, and what's influence it has brought about?Secondly, as an unexpected result-Regulatory Capital Arbitrage is developing rapidly, which will greatly influence the future trends of bank capital adequacy requirement, so the RCA problem is re...
Keywords/Search Tags:Capital, Capital adequacy requirement, External agencies rating, Internal rating system, Internal risk measurement model, Capital planning, Capital allocation.
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