TY - BOOK ID - 137491303 TI - Bank Capital and Systemic Stability AU - Anginer, Deniz AU - Demirguc-Kunt, Asli PY - 2014 PB - Washington, D.C., The World Bank, DB - UniCat KW - Access to Finance KW - Bank Capital KW - Banking Law KW - Banks and Banking Reform KW - Basel Capital KW - Debt Markets KW - Default KW - Distance to Default KW - Finance and Financial Sector Development KW - Financial Intermediation KW - Law and Development KW - Merton Model KW - Systemic Risk UR - https://www.unicat.be/uniCat?func=search&query=sysid:137491303 AB - This paper distinguishes among various types of capital and examines their effect on system-wide fragility. The analysis finds that higher quality forms of capital reduce the systemic risk contribution of banks, whereas lower quality forms can have a destabilizing impact, particularly during crisis periods. The impact of capital on systemic risk is less pronounced for smaller banks, for banks located in countries with more generous safety nets, and in countries with institutions that allow for better public and private monitoring of financial institutions. The results show that regulatory capital is effective in reducing systemic risk and that regulatory risk weights are correlated with higher future asset volatility, but this relationship is significantly weaker for larger banks. The paper also finds that increased regulatory risk-weights not correlated with future asset volatility increase systemic fragility. Overall, the results are consistent with the theoretical literature that emphasizes capital as a potential buffer in absorbing liquidity, information, and economic shocks reducing contagious defaults. ER -