Financial Crisis Evolution Of Bank Capital

3146 Words Apr 25th, 2015 13 Pages
TABLE OF CONTENT:
Introduction 2
Defining Bank Capital 2
Measure of Bank Capital
How Capital Absorbs Risk 2-4
• Covers Credit Risk
• Prevents Liquidity Problems
• Manages Operational Risk
• Restricts banks from taking excessive risk
Manipulation of Capital Standards 4-7
• Quality of Capital Resources
• Internal Rating Based (IRB) approach under Basel-II
• Securitization
• Credit Derivatives

Post Crisis evolution of Bank Capital 7-9
• Strengthening of capital base
• Regulatory Reforms

Conclusion 9
References 10 INTRODUCTION
Due to the integral part that banks play in an economy, their failures can have crippling effect. Thus, to maintain the safety of banks, Basel Committee on bank supervision sets up rules and regulations for their smooth functioning. However, the recent financial crisis witnessed failure of large banks. This failure was caused due to various factors such as inefficient regulations…
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