Banks need capital to help them withstand losses. Yet what constitutes an adequate level of reserves is a topic of heated discussion among bankers, regulators and policy makers. Lower buffers could leave systemically important banks at risk, while stringent requirements might unduly constrain credit availability and raise financing costs for businesses. This scholarly study from the International Monetary Fund examines a dynamic, complex question that cuts across regulatory remits and economic systems. getAbstract recommends it to bank executives and policy makers.
About the Authors
Jihad Dagher, Giovanni Dell’Ariccia, Lev Ratnovski and Hui Tong are economists at the International Monetary Fund. Luc Laeven is director-general of research at the European Central Bank.