search query: @indexterm Banks / total: 1629
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| Author: | Jackson, P. Perraudin, W. Saporta, V. |
| Title: | Regulatory and "economic" solvency standards for internationally active banks |
| Journal: | Journal of Banking and Finance
2002 : MAY, VOL. 26:5, p. 953-976 |
| Index terms: | BANKS BANKING CAPITAL CREDIT RISK |
| Language: | eng |
| Abstract: | The decision may alternatively be expressed as the choice of an appropriate survival probability for representative banks over a horizon such as a year, often termed a "solvency standard". This article sheds light on the solvency standards implied by current and possible future bank regulation and on the "economic solvency standard" that banks choose themselves by their own capital setting decisions. In particular, the authors employ a credit risk model to show that the survival probability implied by the 1988 Basel Accord is between 99.0% and 99.9%. The authors then demonstrate that if a new Basel Accord were calibrated to such a standard, it would not represent a binding constraint on banks' current operations since most banks employ a solvency standard higher than 99.9%. |
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