TY - BOOK ID - 84543045 TI - Bank capital and uncertainty PY - 2010 SN - 1462354726 1455272779 1283567024 9786613879479 1455204528 PB - Washington, D.C. : International Monetary Fund, DB - UniCat KW - Banks and Banking KW - Macroeconomics KW - Industries: Financial Services KW - Financial Risk Management KW - Optimization Techniques KW - Programming Models KW - Dynamic Analysis KW - Business Fluctuations KW - Cycles KW - Financial Markets and the Macroeconomy KW - Banks KW - Depository Institutions KW - Micro Finance Institutions KW - Mortgages KW - Financial Institutions and Services: Government Policy and Regulation KW - Macroeconomics: Consumption KW - Saving KW - Wealth KW - Financial Crises KW - Banking KW - Financial services law & regulation KW - Finance KW - Economic & financial crises & disasters KW - Capital adequacy requirements KW - Loans KW - Countercyclical capital buffers KW - Precautionary savings KW - Financial regulation and supervision KW - Financial institutions KW - Financial crises KW - National accounts KW - Banks and banking KW - Asset requirements KW - Saving and investment KW - United States KW - Bank capital. KW - Uncertainty. UR - https://www.unicat.be/uniCat?func=search&query=sysid:84543045 AB - An important role for bank capital is that of a buffer against unexpected losses. As uncertainty about these losses increases, the theory predicts an increase in the optimal level of bank capital. This paper investigates this implication empirically with U.S. Commercial Banks data and finds statistically significant and robust evidence supporting it. A counterfactual experiment suggests that a decline in uncertainty to the lowest level measured in the sample generates an average reduction in bank capital ratios of slightly over 1 percentage point. However, I also find suggestive evidence that the intensity of this precautionary motive is stronger during recessions. From a policy perspective, these results suggest that the effectiveness of countercyclical capital requirements during bad times will be undermined by banks desire to hold more capital in response to increased uncertainty. ER -