TY - BOOK ID - 84544257 TI - Risky Bank Lending and Optimal Capital Adequacy Regulation AU - Benes, Jaromir. AU - Kumhof, Michael. PY - 2011 SN - 1455296678 1455294659 1283570351 9786613882806 145529263X PB - Washington, D.C. : International Monetary Fund, DB - UniCat KW - Bank loans KW - Asset requirements KW - Capital asset requirements KW - Financial responsibility requirements KW - Minimum asset requirements KW - Requirements, Asset KW - Assets (Accounting) KW - Bank credit KW - Loans KW - Econometric models. KW - Banks and Banking KW - Money and Monetary Policy KW - Industries: Financial Services KW - Investments: Stocks KW - Financial Markets and the Macroeconomy KW - Monetary Policy KW - Banks KW - Depository Institutions KW - Micro Finance Institutions KW - Mortgages KW - Pension Funds KW - Non-bank Financial Institutions KW - Financial Instruments KW - Institutional Investors KW - Financial Institutions and Services: Government Policy and Regulation KW - Monetary Policy, Central Banking, and the Supply of Money and Credit: General KW - Interest Rates: Determination, Term Structure, and Effects KW - Finance KW - Banking KW - Financial services law & regulation KW - Monetary economics KW - Investment & securities KW - Mutual funds KW - Capital adequacy requirements KW - Financial institutions KW - Financial regulation and supervision KW - Stocks KW - Central bank policy rate KW - Financial services KW - Banks and banking KW - Credit KW - Interest rates KW - United States UR - https://www.unicat.be/uniCat?func=search&query=sysid:84544257 AB - We study the welfare properties of a New Keynesian monetary economy with an essential role for risky bank lending. Banks lend funds deposited by households to a financial accelerator sector, and face penalties for maintaining insufficient net worth. The loan contract specifies an unconditional lending rate, which implies that banks can make loan losses. Their main response is to raise lending rates to rebuild net worth. Prudential rules that adjust minimum capital adequacy requirements in response to loan losses significantly increase welfare. But the gains from eliminating limited liability and moral hazard would be an order of magnitude larger. ER -