Bank Capital and Risk in Europe and Central Asia Ten Years after the Crisis

37 Pages Posted: 31 Jan 2020 Last revised: 1 Feb 2020

See all articles by Deniz Anginer

Deniz Anginer

Simon Fraser University (SFU)

Asli Demirgüç-Kunt

World Bank

Davide Salvatore Mare

World Bank - Research Department; University of Edinburgh - Business School

Date Written: January 30, 2020

Abstract

This paper examines changes in bank capital and capital regulations since the global financial crisis, in the Europe and Central Asia region. It shows that banks in Europe and Central Asia are better capitalized, as measured by regulatory capital ratios, than they were prior to the crisis. However, the increase in simple equity ratios for the same banks has been smaller over the past 10 years. The increases in regulatory capital ratios have coincided with a reduction in the stringency of the definition of Tier 1 capital and reduction in risk-weights. Further analyses show that bank risk in Europe and Central Asia is more sensitive to changes in simple leverage ratios than in regulatory capital ratios, consistent with the notion that equity ratios only include high-quality capital and do not rely on internal risk models to compute risk-weights. Although there has been some effort to increase capital and liquidity requirements for institutions deemed systemically important, the region has been lagging in addressing the resolution of these institutions.

Suggested Citation

Anginer, Deniz and Demirgüç-Kunt, Asli and Mare, Davide Salvatore and Mare, Davide Salvatore, Bank Capital and Risk in Europe and Central Asia Ten Years after the Crisis (January 30, 2020). World Bank Policy Research Working Paper No. 9138, Available at SSRN: https://ssrn.com/abstract=3528889

Deniz Anginer (Contact Author)

Simon Fraser University (SFU) ( email )

8888 University Drive
Burnaby, British Columbia V5A 1S6
Canada

Asli Demirgüç-Kunt

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Davide Salvatore Mare

World Bank - Research Department ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

University of Edinburgh - Business School ( email )

Edinburgh, Scotland
United Kingdom

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