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Capital Adequacy Regulation: There is Hardly an Alternative

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  • Niklaus Blattner

Abstract

A critical summary of the theoretical and legal justifications of capital adequacy regulation (CAR) of banks is given. It is shown that CAR is particularly attractive since it uses an existing market mechanism (market for corporate control). The role of CAR in Switzerland is described. The survey shows that CAR is but one in a large group of regulatory instruments. All are justified by the same objectives. The analogy with the "Tinbergen Rule" suggests that a more parsimonious supervisory system is called for. This leads to a number of conclusions on how to improve regulation in Switzerland and elsewhere. The central position of CAR is not disputed.

Suggested Citation

  • Niklaus Blattner, 1996. "Capital Adequacy Regulation: There is Hardly an Alternative," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 132(IV), pages 657-678, December.
    • Handle: RePEc:ses:arsjes:1996-iv-12
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    Cited by:

    1. Kirstein, Roland, 2002. "The new Basle Accord, internal ratings, and the incentives of banks," International Review of Law and Economics, Elsevier, vol. 21(4), pages 393-412, May.
    2. Arnoud W.A. Boot, 1996. "Comments on the paper by THOMAS GEHRIG: "Market Structure, Monitoring and Capital Adequacy Regulation"," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 132(IV), pages 703-706, December.

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