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IR17-007-Echevarria_SystemicBanks.pdf (979.96 KB)

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Working paper

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2017

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cc-by-nc-nd, (c) Echevarría-Icaza et al., 2017
Please use this identifier to cite or link to this item: https://hdl.handle.net/2445/110566

Systemic banks, capital composition and CoCo bonds issuance: The effects on bank risk

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Abstract

This paper shows that systemic banks are prone to increase their regulatory capital ratio through a decline in risk-weighted assets density and an intense use of lower level capital. The market access of systemic banks, and the fact that they were singled out for higher capital requirements seem to have biased them towards lower level capital, consistent with the theory that asymmetric information drives capital decisions. These effects are particularly strong for institutions that had a rather low level of capitalization at the start of the period and for those that exhibited a strong use of Additional Tier I capital before the regulatory changes. Strict capital composition requirements for firms with lower buffers would be an improvement.

Subject

Capital de risc, Bancs, Risc (Economia)

Subject (English)

Venture capital, Banks, Risk

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Documents de treball (Institut de Recerca en Economia Aplicada Regional i Pública (IREA))

Citation

ECHEVARRÍA-ICAZA, Victor and SOSVILLA RIVERO, Simón. Systemic banks, capital composition and CoCo bonds issuance: The effects on bank risk. IREA – Working Papers. 2017. Vol.  IR17/07. ISSN 2014-1254. [consulted: 18 of August of 2026]. Available at: https://hdl.handle.net/2445/110566

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