This paper studies capital requirements and their welfare implications in a dynamic general equilibrium model of banking. I embed two, less commonly considered but important, mechanisms. Firstly, banks choose entry exit, which lets the number change endogenously. Strengthening reduces banks' franchise value damages liquidity providing function through extensive margin. Secondly, since equity is...

We study market-consistent valuation of liability cash flows motivated by current regulatory frameworks for the insurance industry. The value assigned to an is consequence (1) considering a hypothetical transfer company's liabilities, and financial assets intended hedge these empty corporate entity, (2) circumstances under which capital provider would want achieve maintain ownership this entity...

Abstract The effects of capital requirements on risk-taking and welfare are studied in an overlapping generations model endogenous growth with banking, limited liability, government guarantees. Capital producers face a choice between safe technology risky, more productive but socially inefficient, technology. Bank is endogenous. As result skin the game effect—motivated either as aggregate exter...

Abstract Using firm‐level data from 16 euro‐area countries over 2008–2014, we investigate how the performance of bank‐affiliated private equity‐backed companies evolves after European Banking Authority increased capital requirements for their parent banks. We find that portfolio connected to exposed banks reduce level investment and experience weaker asset growth, employment growth profitabilit...

In this paper we elaborate on Swiss Solvency Test (SST) consistent group diversification effects via optimizing the web of capital and risk transfer (CRT) instruments between the legal entities. A group level SST principle states that subsidiaries can be sold by the parent company at their economic value minus some minimum capital requirement. In a numerical example we examine the dependence of...

Venture capital funds have been facing increasing regulatory scrutiny since the 2007 financial crisis, particularly in respect of calls for increased disclosure requirements. In this paper, we examine whether more stringent securities regulation helps or hinders the supply and performance of venture capital as well as new business creation (i.e., entrepreneurial spawning). Based on data from 34...

The labour requirements and capital costs for the various cane yard layouts in the South African mills vary significantly. The various types of equipment available for cane handling and their effect on the capital and operating costs of the cane yard are discussed.

The paper discusses the reform of capital regulation of banks in the wake of the financial crisis of 2007/2009. Whereas the Basel Committee on Banking Supervision seems to go for marginal changes here and there, the paper calls for a thorough overhaul, moving away from risk calibration and raising capital requirements very substantially. The argument is based on the observation that the current...