Financial Market Regulation in Germany - Capital Requirements of Financial Institutions
DOI:
https://doi.org/10.13133/2037-3643/12468Keywords:
Banking Regulation, Capital Adequacy, Risk Models, GermanyAbstract
This paper examines banks’ capital adequacy regulation in Germany. It reviews the capital requirement regulation in Germany from a historical perspective, and identifies general trends. Such analysis allows pointing out some severe problems associated with the current approaches to capital requirement regulation. Among the recent trends is the gradual softening of the eligibility criteria for regulatory equity, and the reliance on internal risk models for the determination of risk weights. While the former trend has been reversed after the crisis, the latter is still pursued. The problems inherent in using internal risk models to determine capital requirements are discussed in relation to changes due to the introduction of Basel II.5 and Basel III.
JEL codes: G18, G28, N24
References
A., Admati, P.M., DeMarzo, M.F., Hellwig and P., Pfleiderer (2013): Fallacies, Irrelevant Facts, and Myths in the Discussion of Capital Regulation: Why Bank Equity is Not Socially Expensive, Rock Center for Corporate Governance at Stanford University, Working Paper, 161.
A., Admati, M., Hellwig (2013): The Bankers’ New Clothes: What’s Wrong with Banking and What to Do About It, Princeton.
F., Allen, D.M., Gale (2002): Capital Adequacy Regulation: In Search of a Rationale, WFIC Working Paper, 03-07.
S., Angius, C., Frati, A., Gerken, P., Härle, M., Piccitto and U., Stegemann (2011): Risk modeling in a new paradigm: developing new insight and foresight on structural risk, McKinsey Working Papers on Risk, 13.
Basel Committee on Banking Supervision (1999): Capital requirements and bank behaviour: the impact of the Basel Accord, BCBS Working Papers, 1.
Basel Committee on Banking Supervision (2009): Analysis of the trading book quantitative impact study, Bank for International Settlements.
Basel Committee on Banking Supervision (2013a): A brief history of the Basel Committee, Bank for International Settlements.
Basel Committee on Banking Supervision (2013b): Fundamental review of the trading book: A revised market risk framework, consultative document, Bank for International Settlements, October.
T., Braithwaite (2011): Banks turn to financial alchemy in search for capital, Financial Times, 24.10.2011.
M.K., Brunnermeier, M., Oehmke (2013): Bubbles, Financial Crises, and Systemic Risk, in: G.M. Constantinides, M. Harris and R.M. Stulz (eds.), Handbook of the Economics of Finance: 1221-88.
Bundesanstalt für Finanzdienstleistungsaufsicht (2011), Jahresbericht 2010, Bonn.
Bundesanstalt für Finanzdienstleistungsaufsicht (2012), Jahresbericht 2011, Bonn.
Committee on Banking Regulation and Supervisory Practices (1987): Proposal for international convergence of capital measures and capital standards, consultative paper, December.
J., Danielson (2002): The Emperor has no Clothes: Limits to Risk Modelling, Journal of Banking and Finance, 26: 1273-96.
J., Daníelsson, P., Embrechts, C., Goodhart, C., Keating, F., Muennich, O., Renault and H.S., Shin (2001): An Academic Response to Basel II, LSE Financial Markets Group an ESRC Research Centre Special Paper Series, 130.
D., Detzer (2012): New instruments for banking regulation and monetary policy after the crisis, Intervention, European Journal of Economics and Economic Policies, 9-2: 233-54
Deutsche Bundesbank (1962): Monthly Report, March, Frankfurt.
Deutsche Bundesbank (1964): Monthly Report, December, Frankfurt.
Deutsche Bundesbank (1969): Monthly Report, March, Frankfurt.
Deutsche Bundesbank (1976): Monthly Report, July, Frankfurt.
Deutsche Bundesbank (1985): Monthly Report, March, Frankfurt.
Deutsche Bundesbank (1988): Monthly Report, January, Frankfurt.
Deutsche Bundesbank (1990): Monthly Report, August, Frankfurt.
Deutsche Bundesbank (1993a): Monthly Report, January, Frankfurt.
Deutsche Bundesbank (1993b): Monthly Report, March, Frankfurt.
Deutsche Bundesbank (1998): Monthly Report, May, Frankfurt.
Deutsche Bundesbank (2001): Monthly Report, April, Frankfurt.
Deutsche Bundesbank (2006): Monthly Report, December, Frankfurt.
Deutsche Bundesbank (2009a): Monthly Report, January, Frankfurt.
Deutsche Bundesbank (2009b): Monthly Report, September, Frankfurt.
Deutsche Bundesbank (2011): Zweite Verordnung zur weiteren Umsetzung der geänderten Bankenrichtlinie und der geänderten Kapitaladäquanzrichtlinie.
Deutsche Bundesbank (2013): Monthly Report, June, Frankfurt.
Deutscher Bundesrat (1984): 545. Sitzung, 20 December, Bonn.
Deutscher Bundestag (1984): Entwurf eines Dritten Gesetzes zur Änderung des Gesetzes über das Kreditwesen, Drucksache 10/1441, 14 May, Bonn.
Deutscher Bundestag (2006): Plenarprotokoll 16/18, 15 February, Berlin.
C.A.E., Goodhart (2005): Financial Regulation, Credit Risk and Financial Stability, National Institute Economic Review, 192.
The Financial Crisis Inquiry Commission (2011): The Financial Crisis Inquiry Report.
X., Freixas, J.-C., Rochet (2008): Microeconomics of Banking.
A., Hübner, L., Noonan (2013): Banken rechnen sich ihre Bilanzrisiken schön, Format.at, 13.02.2013. available at: http://www.format.at/articles/1307/935/352504/banken-bilanzrisiken.
J.P., Krahnen, E., Carletti (2007): Kapitalregulierung von Banken und systemische Risiken im Lichte von Basel II, Kreditwesen, 8.
M., Labonte (2013): Systemically Important or "Too Big to Fail" Financial Institutions, CRS Report for Congress.
N., Masschelein (2007): Monitoring pro-cyclicality under the capital requirements directive: preliminary concepts for developing a framework, National Bank of Belgium, Working Paper, 120.
O., Storbeck (2012): Wie Banken ihre Risiken klein rechnen, Handelsblatt.com, 19.02.2012, available at: http://www.handelsblatt.com/politik/oekonomie/nachrichten/das-grosse-risiko-versteckspiel-wie-banken-ihre-risiken-klein-rechnen/6219734.html.
Downloads
Published
How to Cite
Issue
Section
License
