How much capital should banks hold to cover their risk? That question has been thrown back and forth among policymakers, bankers, and academics for years – and now, with the global crisis still lingering, the debate is more intense than ever.
The official sector – through the Basel Committee on Banking Supervision – have set the minimum Basel III capital adequacy ratio (CAR) at 10.5% , but have yet to reach an agreement on the magnitude of a proposed capital surcharge for so-called “global, systemically important banks”. Bankers, on the other hand, have argued that an overly conservative minimum CAR is too costly and will negatively impact credit intermediation and jeopardize the economic recovery. Finally, prominent academics, led by Anat Admati of Stanford, have made a strong case to increase the minimum CAR to 15% (based on a non-risk weighted assets measure), arguing that the industry’s concerns are nothing more than scare-mongering and that the new Basel III capital rules fall far short of what is needed to lessen both the likelihood or severity of future financial crises.
Πηγή: Voxeu