IMF Working Papers

The Global Macroeconomic Costs of Raising Bank Capital Adequacy Requirements

Author/Editor:

Francis Vitek ; Scott Roger

Publication Date:

February 1, 2012

Electronic Access:

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Summary:

This paper examines the transitional macroeconomic costs of a synchronized global increase in bank capital adequacy requirements under Basel III, as well as a capital increase covering globally systemically important banks. The analysis, using an estimated multi-country model, contributed to the work of the Macroeconomic Assessment Group analysis, especially in estimating the potential international spillovers associated with a global increase in capital requirements. The magnitude of the effects found in this analysis is relatively modest, especially if monetary policies have scope to ease in response to a widening of interest rate spreads by banks.

Series:

Working Paper No. 12/44

Subject:

Banks Capital requirements Cross country analysis Economic models Monetary policy Spillovers