ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Bank Response to Capital Requirements

The increased emphasis on capital regulation has raised a number of interrelated questions. First, is focusing on capital an efficient way of regulating banks? Secondly, what is the best way to structure capital regulation? Thirdly, how do banks respond to different types of capital regulation? This paper focuses on the last two questions, examining bank responses and the costs associated with these responses to capital requirements. The discussion draws heavily on international experience and concludes with an attempt to bring to bear empirically these experiences in the Indian context.
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