Market pressure matters for capital

Market pressure was an important factor in the banks' capital build-up during the early 1990s, according to a new paper by the National Bank of Belgium.

The author finds that weakly capitalised American banks that were also not exposed to market discipline did not increase their capital ratios faster than other US banks.

The paper investigates how banks from six G10 countries adjusted their capital and their risk-weighted assets after the passage of the 1988 Basel Accord.

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