Main Content

Bank Capital and Stress Testing

  • Too Much of a Good Thing: The Implications of Higher Bank Capital Requirements

    Alexey Levkov, and Clark Peterson

    Capital requirements are important to ensure that externalities associated with a bank’s failure are borne by the bank alone. However, there are both private and social costs associated with requiring banks to hold more capital. Empirical and theoretical evidence indicate that there are significant trade-offs in requiring higher levels of bank equity capital. Policymakers should seek to identify the costs and benefits of requiring more capital at banks and calibrate rulemakings accordingly.
  • The Art of the Possible: Prospects for Financial Services Legislation in the 114th Congress

    Samuel Woodall III

    With a Republican-controlled Congress and a Democratic president, the conventional wisdom is that the next two years will portend an extended and partisan political stalemate that will stymie any prospect for enactment of meaningful financial services legislation. However, real opportunities for the advancement of financial services legislation are in play. In fact, if recent history is any indicator, Congressional Republicans will have the chance to do something that has been off limits for the last several years: amend Dodd-Frank.

  • My Perspective

    Rob Ceske

    As banks and other market participants were under-prepared for the liquidity challenges of the crisis, heightened focus on liquidity is justified. However, regulators should be wary of how new liquidity regulations interact with capital rules, impact greater risk management practices, and drive liquidity risk to the shadows.
  • Macroeconomic Modeling and Financial Stability: Lessons from the Crisis

    Andrew W Lo

    The dynamic stochastic general equilibrium model (DSGE) marked a major milestone by capturing the dynamic change of economic variables over time. However, many DSGE models were exposed as having omitted critical structural linkages relevant to the financial crisis. To address these deficiencies, existing DSGE models should be enhanced to better incorporate the role of the financial sector and financial markets. In addition, these models should reexamine key micro-foundations of the model and consider behavioral components.
  • For the Record

    TCH Association President Paul Saltzman calls for a reconceptualization of banking resilience and discusses key considerations for macroprudential policy with this in mind.