Challenges in maintaining the regulatory capital requirements
by Satish Sharma, John Lavery, Konstantin Polyanskiy
International Journal of Financial Services Management (IJFSM), Vol. 4, No. 4, 2010

Abstract: Within the current theoretical literature it has been established that banks tend to maintain the regulatory capital requirements either by raising additional capital through equity issues or by selling/substituting risky assets. This paper bridges the gap for a comparative explanation in relation to Basel II system requirements by addressing three specific questions relating to capital adequacy, risk exposure and equity issues which have arisen as a result of two external factor changes: firstly, the adoption of the Basel II standards, and secondly, improvements to UK Financial Services Authority (FSA) regulations. Prior studies on UK banks have revealed that capital has been maintained by issuing equity rather than through the substitution of risky assets. In the light of the recent changes brought by the Basel II system of risk-based capital requirements, the approach adopted by UK banks might have changed. Thus, this paper presents an empirical research on how UK banks maintain the regulatory capital requirements when Basel II regulations are imposed. The findings suggest that there is no common mechanism adopted by UK banks for compliance with the regulatory standards.

Online publication date: Sat, 02-Oct-2010

The full text of this article is only available to individual subscribers or to users at subscribing institutions.

 
Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.

Pay per view:
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.

Complimentary Subscribers, Editors or Members of the Editorial Board of the International Journal of Financial Services Management (IJFSM):
Login with your Inderscience username and password:

Username:        Password:          Forgotten your password?

Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.

If you still need assistance, please email subs@inderscience.com