Abstract
This paper proposes replacing the present Basel capital requirement with a new counter-cyclical measure. Optimally, (i) the Basel capital requirement ratio should depend on various economic factors such as the cyclical stage of GDP, credit growth, stock prices, interest rates, and land prices—hence, avoiding the expansion of bank loans during a boom period and a credit crunch during a sluggish period; (ii) the Basel minimum capital requirement rule should be different from country to country since the economic structures and the behavior of banks are different; and (iii) cross-border bank operation should follow the minimum capital requirement ratio where bank lending activities occur rather than the origin of the source of funds.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
