Basel capital ratios lost credibility during crisis - Atlanta Fed paper investigates
The Basel capital adequacy ratios lost credibility with markets during the financial crisis due to the reliance of the Basel standards on overstated asset values in reported equity capital, a Federal Reserve Bank of Atlanta working paper argues.
According to The adoption of stress testing: why the Basel capital measures were not enough by Larry Wall, US stress tests were able to assist in restoring credibility, in part because they could capture deterioration in asset values.
"Many European
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