“This article considers whether cost-benefit analysis can inform two important issues in the capital regulation of banks: (1) the choice of a rule or standard and (2) the level of complexity in that rule or standard. I analyze these issues by examining the historical adoption of minimum capital requirements and risk-based capital requirements. I argue that simple, minimum capital requirements are most useful when regulators seek to manage poorly understood risks with large externalities. I argue that risk-weighted capital requirements are most useful when regulators face well-understood risks while acting as agents of ordinary bank creditors. I suggest how these principles can help inform regulatory decision-making in the face of uncertainty over the cost of capital regulation.”
Sabrina is also the solo Editor, Publisher and Founder of LLRX.com® – Legal, technology and knowledge discovery resources on the “moving edge” for Librarians, Lawyers, Researchers, Academic and Public Interest Communities – launched in 1996.