Credit risk modeling and internal capital allocation processes: implications for a models-based regulatory bank capital standard

Article Abstract:

A study evaluated the internal credit risk models utilized in evaluating the capital necessary to support the credit activities of a bank. The near-term feasibility of an internal model approach in evaluating risk-based capital (RBC) was examined in terms of the minimum regulatory capital standards and discretionary supervisory assessments of capital sufficiency. It was observed that the internal risk model can be incorporated into capital policies such as the establishment of RBC requirements and its use in the development of examination guidance for the analysis of capital sufficiency.

Asset & Risk Management, Capital Management-Venture Capital, Models, Risk assessment, Venture capital companies, Risk management, Venture capital, Bank capital

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Risk-based capital, portfolio risk, and bank capital: a simultaneous equations approach

Article Abstract:

A three least squares analysis of the relationship between bank capital, portfolio risk and risk-based capital standards reveals that risk-based capital standards are effective in reducing portfolio exposure and increasing capital ration of banks that have already met the standards and risk-based capital-constrained banks. The results however, do not support the degree of failure to conform with risk-based standards.

Financial Management NEC, Evaluation, Risk (Economics), Hedging (Finance), Financial management

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Determinants of Federal Reserve lending to failed banks

Article Abstract:

The Federal Reserve lent to troubled banks during 1985-1990. The hypotheses about the determinants of borrowings by failed banks during that period is tested. Analysis shows evidence that credit was allocated by the Federal Reserve based on liquidity needs. No evidence has been gathered to show that the Federal Reserve favored member banks in its allocation.

Finance, United States. Federal Reserve Board, Bank failures

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