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Bank capital adequacy framework

Author

Listed:
  • Faidon Kalfaoglou

    (Bank of Greece)

Abstract

The debt crisis in Greece and the resulting haircut on sovereign bonds (known as PSI) adversely affected bank capital and resulted in state funds being required to recapitalize the banks. During that process, several questions arose about the meaning of capital adequacy in banks. This paper considers the question from a non-technical point of view and surveys the regulatory requirements for capital adequacy contained in the so-called Basel framework. It analyses all contributing parts of the Capital Adequacy Ratio (CAR), including regulatory capital, credit risk, market risk and operational risk, raising in each case the concerns of the literature as well as recent contributions. For the reader’s convenience, the more technical aspects are presented in boxes and annexes.

Suggested Citation

  • Faidon Kalfaoglou, 2012. "Bank capital adequacy framework," Economic Bulletin, Bank of Greece, issue 36, pages 43-81, April.
    • Handle: RePEc:bog:econbl:y:2012:i:36:p:43-81
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    File URL: https://www.bankofgreece.gr/BogEkdoseis/econbull201204.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Costas N. Kanellopoulos, 2012. "The Size and structure of uninsured employment," Economic Bulletin, Bank of Greece, issue 37, pages 23-41, December.
    2. Styliani Belli & Constantina Backinezos, 2016. "The transition to the new methodology for the compilation of balance of payments statistics – BPM6," Economic Bulletin, Bank of Greece, issue 43, pages 19-29, July.
    3. repec:bog:econbl:y:2016:i:43:p:19-29 is not listed on IDEAS
    4. Christos Papazoglou & Dimitrios Sideris & Orestis Tsagklas, 2016. "Europe as an optimum currency area: the experience of the Baltic countries," Economic Bulletin, Bank of Greece, issue 44, pages 35-46, December.
    5. repec:bog:econbl:y:2016:i:43:p:55-75 is not listed on IDEAS
    6. Sofia Anyfantaki, 2016. "The evolution of financial technology (FinTech)," Economic Bulletin, Bank of Greece, issue 44, pages 47-62, December.
    7. Nikos Vettas & Ioannis Giotopoulos & Evangelia Valavanioti & Svetoslav Danchev, 2016. "The determinants of new firms’ export performance," Economic Bulletin, Bank of Greece, issue 43, pages 7-17, July.
    8. Faidon Kalfaoglou, 2015. "Alternative approaches to NPLs resolution. Case studies," Economic Bulletin, Bank of Greece, issue 41, pages 45-70, July.
    9. Evangelia Georgiou, 2015. "The use of cash and electronic payment instruments in the economy," Economic Bulletin, Bank of Greece, issue 41, pages 31-44, July.
    10. repec:bog:econbl:y:2016:i:43:p:31-53 is not listed on IDEAS
    11. Konstantina Manou & Evangelia Papapetrou, 2016. "The economic behaviour of households in Greece: recent developments and prospects," Economic Bulletin, Bank of Greece, issue 44, pages 7-33, December.
    12. Sophia Lazaretou, 2016. "The Greek brain drain: the new pattern of Greek emigration during the recent crisis," Economic Bulletin, Bank of Greece, issue 43, pages 31-53, July.
    13. Petros M. Migiakis, 2012. "Reviewing the proposals for common bond issuances by the euro-area sovereign under a long-term perspective," Economic Bulletin, Bank of Greece, issue 37, pages 43-54, December.
    14. repec:bog:econbl:y:2016:i:43:p:7-17 is not listed on IDEAS
    15. Dimitra Dimitropoulou & Anastasia Koutsomanoli-Filippaki & Evangelos Charalambakis & Georgios Aggelis, 2014. "The financing of Greek enterprises before and during the crisis," Economic Bulletin, Bank of Greece, issue 39, pages 7-20, July.
    16. Sofia Lazaretou, 2015. "How can the use of historical macroeconomic data series support economic analysis and policy-making? The new Greek macro history database 1833-1949 as part of the large database of Southeastern Europe," Economic Bulletin, Bank of Greece, issue 41, pages 71-101, July.
    17. Costas N. Kanellopoulos, 2014. "The private sector Greek labour market during the crisis," Economic Bulletin, Bank of Greece, issue 39, pages 21-36, July.
    18. Faidon Kalfaoglou, 2016. "Bank recapitalisation: a necessary but not sufficient condition for resuming lending," Economic Bulletin, Bank of Greece, issue 43, pages 55-75, July.
    19. Zacharias Bragoudakis & Dimitrios Sideris, 2012. "Do retail gasoline prices adjust symmetrically to crude oil price changes? the case of the Greek oil market," Economic Bulletin, Bank of Greece, issue 37, pages 7-21, December.
    20. Sophia Lazaretou, 2014. "The smart economy: cultural and creative industries in Greece: can they be a way out of the crisis?," Economic Bulletin, Bank of Greece, issue 39, pages 73-103, July.
    21. Ioannis Chatzivasiloglou, 2016. "Introduction to solvency ii of (re)insurance undertakings," Economic Bulletin, Bank of Greece, issue 44, pages 63-103, December.
    22. Costas N. Kanellopoulos, 2015. "The effects of minimum wages on wages and employment," Economic Bulletin, Bank of Greece, issue 41, pages 7-29, July.
    23. Aikaterini Chaireti, 2014. "The housing situation of residents of Greece in the time of crisis 2008-2012," Economic Bulletin, Bank of Greece, issue 39, pages 105-141, July.
    24. Faidon Kalfaoglou, 2014. "European banking union: “Europeanising” banks’ financial safety net," Economic Bulletin, Bank of Greece, issue 39, pages 37-72, July.

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    More about this item

    Keywords

    capital adequacy; regulatory capital; credit risk; market risk; operational risk;
    All these keywords.

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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