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Discretionary Capital Buffers and Bank Risk

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conference contribution
posted on 23.07.2020 by Martien Lubberink
This paper examines the association between discretionary capital buffers, capital requirements, and risk for European banks. The discretionary buffers are banks' own buffers, or headroom: the difference between reported and required capital. I exploit capital requirements data that banks started to disclose since the release of a 2015 European Banking Authority opinion. Results using detailed SREP and Pillar 2 data of the largest 99 European banks over 2013-2019 show that less headroom is associated with increased bank risk. An additional examination reveals a positive association between headroom and stress test results for banks subjected to the Single Supervisory Mechanism, a result that runs against supervisory requirements.

History

Preferred citation

Lubberink, M. (n.d.). Discretionary Capital Buffers and Bank Risk. In SSRN Electronic Journal AFAANZ, Melbourne. Elsevier BV. https://doi.org/10.2139/ssrn.3610562

Conference name

AFAANZ

Conference Place

Melbourne

Conference start date

04/07/2020

Conference finish date

07/07/2020

Title of proceedings

SSRN Electronic Journal

Contribution type

Unpublished Paper

Publisher

Elsevier BV

Publication status

Submitted

eISSN

1556-5068

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