TY  - JOUR
AU  - Carey, Mark
TI  - Dimensions of Credit Risk and Their Relationship to Economic Capital Requirements
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7629
PY  - 2000
Y2  - March 2000
DO  - 10.3386/w7629
UR  - http://www.nber.org/papers/w7629
L1  - http://www.nber.org/papers/w7629.pdf
N1  - Author contact info:
Mark Carey
1819 N Underwood St.
Arlinton, VA 22205
E-Mail: mark.carey@garp.com
M1  - published as Mark Carey. "Dimensions of Credit Risk and Their Relationship to Economic Capital Requirements," in Frederic S. Mishkin, editor, "Prudential Supervision: What Works and What Doesn't" University of Chicago Press (2001)

AB  - Now in prospect is a major revision of international bank capital regulations that would embody recent advances in credit risk measurement and management. Previous regulations have been simpler in structure, with a primary goal of getting capital requirements right on average, and thus have largely ignored the difference between average and marginal. This paper presents evidence that explicit treatment in new regulations of several important dimensions of credit risk is necessary. If such dimensions are compressed or ignored, capital arbitrage activities by banks are likely to continue, leading to an increase in bank failure rates over time.
ER  -