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Discretionary Capital Buffers and Bank Risk

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conference contribution
posted on 23.07.2020, 23:43 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Unpublished Paper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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