Chapter
II. Theoretical Background: The Benefits and Costs of Bank Capital
III. How Much Bank Capital Is Enough?
A. Sufficient Levels of Capital in Past Banking Crises
B. Capital Sufficient to Avoid Public Recapitalizations of Banks
IV. How Costly Are Higher Capital Requirements?
A. Steady-State Cost of Capital
B. Costs of Transitioning to Higher Capital
C. Insights from General Equilibrium Models
1. Basel I, Basel II, and Basel III Capital Requirements
2. Example: Capital Needed to Absorb NPLs Equal to 18 Percent of Assets
3. Pass-Through of Higher Capital to Loan Rates: Evidence from U.S. Commercial and Industrial Loans
4A. Estimate of the Steady-State Impact of Higher Capital Requirements on the Cost of Bank Credit
4B. Estimates of the Transitional Impact of Higher Capital Requirements on the Cost and Volume of Bank Credit
1. Tier 1 and Total Capital Ratios for Large Global Banks since 2000
2. Peak NPL Rations in Banking Crises
3. Share of Banking Crises without Creditor Losses (OECD countries), Based on the Loss Absorption Capacity of Bank Capital
4. Share of Banking Crises without Creditor Losses (all countries), Based on the Loss Absorption Capacity of Bank Capital
5. Nonperforming Loans as a Share of GDP in OECD vs. Non-OECD Countries
6. Precrisis Bank Capital and Fiscal Recapitalization Expenses in Banking Crises in 2007 Onward
7. Share of Public Recapitalizations Avoided, Depending on Hypothetical Precrisis Bank Capital Ratios
8. Precrisis Bank Capital and Capital Injections during the Crisis
9. Bank Capital Ratios and Credit Provision, Pre- and Postcrisis
Benefits and Costs of Bank Capital
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