Are bank capital requirements optimally set? Evidence from researchers’ views

Abstract

<p>This note discusses the findings of a global survey of 149 leading academic researchers on bank capital regulation. The median (average) respondent prefers a 10% (15%) minimum non-risk-weighted equity-to-assets ratio, which is considerably higher than the current requirement. North Americans prefer a significantly higher equity-to-assets ratio than Europeans. We find substantial support for the new forms of regulation introduced in Basel III. The best predictor of capital requirement preference is how strongly an expert believes that higher capital requirements would increase the cost of bank lending.<br></p>