Capital requirements, loan renegotiation and the borrower's choice of financing source

Article Abstract:

The effect of bank capital requirements on the customer's decision to borrow from a certain financial institution is discussed. Likewise included as a variable in the analysis is the motivation to renegotiate debt. It is shown that an increase in capital requirements generally decreases demand for loans, a trend aggravated by the decreased desire of banks to restructure loans. Some customers may migrate to the capital market for credit when banks increase capital requirements.

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Managerial rents and regulatory intervention in troubled banks

Article Abstract:

A model that examines the incentives rewarded to bank managers in exchange for risky assets is introduced. Risk choices of bank managers depend on the timing of regulations and the framework of compensation agreements. However, these choices may be eliminated by providing for limitations in compensation agreements. The Federal Deposit Insurance Corp. Improvement Act of 1991 authorizes the regulation of bonuses for managers of troubled banks.

Management, Officials and employees, Compensation and benefits, Executives, Executive compensation

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Bank holding company capital targets in the early 1990s: the regulators versus the markets

Article Abstract:

An economic model that simulates and tests the effect of both regulations and the workings of the financial market on the capital ratios of bank holding companies is discussed. The application of the model demonstrates that majority of these firms were content with their capital ratios in 1989 but accelerated pressure from regulatory authorities for the period 1990-1992 contributed to some sort of a credit crisis.

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