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Solvency, Liquidity, Asset-Backed Paper, and the Carry Trade

In: Financial Boom and Gloom

Author

Listed:
  • Dimitris N. Chorafas

    (New York Academy of Sciences)

Abstract

Regulators, members of the board of directors, and the public must be confident that the capital requirements of a credit institution are determined in a way that enhances safety and soundness, not only of the company itself but of the banking system as a whole. While capital adequacy regulations should neither penalize banks nor artificially distort the competitive playing field, they should assure the bank’s survival in case of crisis — precisely when core capital is the most important. In terms of capital adequacy, banks suffer from two catastrophic risks: Insolvency, and Illiquidity.

Suggested Citation

  • Dimitris N. Chorafas, 2009. "Solvency, Liquidity, Asset-Backed Paper, and the Carry Trade," Palgrave Macmillan Studies in Banking and Financial Institutions, in: Financial Boom and Gloom, chapter 9, pages 209-234, Palgrave Macmillan.
    • Handle: RePEc:pal:pmschp:978-0-230-23583-0_9
    DOI: 10.1057/9780230235830_9
    as

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