Hostname: page-component-cd9895bd7-dk4vv Total loading time: 0 Render date: 2024-12-22T21:47:18.076Z Has data issue: false hasContentIssue false
  • English
  • Français

A Normative Approach to Bank Capital Adequacy

Published online by Cambridge University Press:  06 April 2009

Eli Talmor
Get access Rights & Permissions [Opens in a new window]

Extract

Virtually all commercial banks in the United States are supervised by one of the three Federal bank regulatory agencies. Although these agencies share the objective of identifying banks with financial difficulties that may lead to their failure under adverse conditions, they have never reached an agreement as to a uniform approach to capital adequacy. Under these circumstances and because of its critical value to bank regulation, the issue of capital adequacy has been extensively investigated by both practitioners and academicians. Those efforts have tended in recent years to concentrate on characterizing problem banks by using multivariate discriminant analysis. Typical examples are studies by Dince and Fortson [10], Sinkey [25, 26], and Sinkey and Walker [27], which use this method to identify the most indicative financial ratios for bank soundness and compare the ability of different formulas to predict bank failure.

Type
Trefftz' Award Paper
Information
Journal of Financial and Quantitative Analysis , Volume 15 , Issue 4 , November 1980 , pp. 785 - 811
Copyright
Copyright © School of Business Administration, University of Washington 1980

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

[1]Altman, E. I. “Financial Ratios, Discriminant Analysis and the Prediction of Corporate Bankruptcy.” Journal of Finance, Vol. 23 (09 1968), pp. 589–609.CrossRefGoogle Scholar
[2]Altman, E. I. “A Reply.” Journal of Finance, Vol. 25 (12 1970), pp. 1169–1172.Google Scholar
[3]Altman, E. I.; Haldeman, R. G.; and Narayanan, P.. “ZETA Analysis: A New Model to Identify Bankruptcy Risk of Corporations.” Journal of Banking and Finance, Vol. 1 (06 1977), pp. 29–54.CrossRefGoogle Scholar
[4]Benston, G. J. “Bank Examination.” The Bulletin of the Institute of Finance, Graduate School of Business Administration, New York University, Nos. 89–90 (05 1973).Google Scholar
[5]Benston, G. J., and Marlin, J. Tepper. “Bank Examiner's Evaluation of Credit: An Analysis of the Usefulness of Substandard Loan Data.” Journal of Money, Credit and Banking, Vol. 6 (01 1974), pp. 23–44.CrossRefGoogle Scholar
[6]Clinch, J. H. M. “Liquidity Imbalances: Profits and Penalties.” Journal of Bank Research, Vol. 6 (Autumn 1975), pp. 186–189.Google Scholar
[7]Cooper, I. A. “Asset Values, Interest-Rate Changes and Duration.” Journal of Financial and Quantitative Analysis, Vol. 12 (12 1977), pp. 701–723.CrossRefGoogle Scholar
[8]Crosse, H. D., and Hempel, G. H.. Management Policies for Commercial Banks. Englewood Cliffs, N.J.: Prentice-Hall, Inc. (1973).Google Scholar
[9]Dewald, W. G., and Dreese, G. R.. “Bank Behavior with Respect to Deposit Variability.” Journal of Finance, Vol 25 (09 1970), pp. 869–879.CrossRefGoogle Scholar
[10]Dince, R. R., and Fortson, J. C.. “The Use of Discriminant Analysis to Predict the Capital Adequacy of Commercial Banks.” Journal of Bank Research, Vol. 3 (Spring 1972), pp. 54–62.Google Scholar
[11]Ingersoll, J. E.; Skelton, J.; and Weil, R. L.. “Duration Forty Years Later.” Journal of Financial and Quantitative Analysis, Vol. 13 (11 1978), pp. 627–650.CrossRefGoogle Scholar
[12]Kahane, Y. “Capital Adequacy and the Regulation of Financial Intermediaries.” Journal of Banking and Finance, Vol. 1 (10 1977), pp. 207–218.CrossRefGoogle Scholar
[13]Lanstein, R., and Sharpe, W. F.. “Duration and Security Risk.” Journal of Financial and Quantitative Analysis, Vol. 13 (11 1978), pp. 653–668.CrossRefGoogle Scholar
[14]Lev, B.Financial Statement Analysis: A New Approach. Englewood Cliffs, N.J.: Prentice-Hall, Inc. (1974).Google Scholar
[15]Luckett, D. G. “Credit Standards and Tight Money.” Journal of Money, Credit and Banking, Vol. 2 (11 1970), pp. 420–434.CrossRefGoogle Scholar
[16]Martin, D. “Early Warnings of Bank Failure: A Logit Regression Approach.” Journal of Banking and Finance, Vol. 1 (11 1977), pp. 249–276.CrossRefGoogle Scholar
[17]Mingo, J. J., and Wolkowitz, B.. “The Effects of Regulation on Bank Balance Sheet Decisions.” Journal of Finance, Vol. 32 (12 1977), pp. 1605–1616.CrossRefGoogle Scholar
[18]Pye, G. “Gauging the Default Premium.” Financial Analysts Journal, Vol. 30 (01–02 1974), pp. 49–52.CrossRefGoogle Scholar
[19]Santomero, A. M., and Vinso, J. D.. “Estimating the Probability of Failure for Commercial Banks and the Banking System.” Journal of Banking and Finance, Vol. 1 (10 1977), pp. 185–205.CrossRefGoogle Scholar
[20]Santomero, A. M., and Watson, R. D.. “Determining an Optimal Capital Standard for the Banking Industry.” Journal of Finance, Vol. 32 (09 1977), pp. 1267–1282.CrossRefGoogle Scholar
[21]Scott, J. “Theoretical and Empirical Models of Bankruptcy Prediction.” Work in Progress, Graduate School of Business, Columbia University (03 1979).Google Scholar
[22]Sharpe, W. F. “A Simplified Model for Portfolio Analysis.” Management Science, Vol. 9 (01 1963), pp. 277–293.CrossRefGoogle Scholar
[23]Sharpe, W. F.Investments. Englewood Cliffs, N.J.: Prentice-Hall, Inc. (1978).Google Scholar
[24]Sharpe, W. F. “Bank Capital Adequacy, Deposit Insurance and Security Values.” Journal of Financial and Quantitative Analysis, Vol. 13 (11 1978), pp. 701–718.CrossRefGoogle Scholar
[25]Sinkey, J. F. “A Multivariate Statistical Analysis of the Characteristics of Problem Banks.” Journal of Finance, Vol. 30 (03 1975), pp. 21–36.CrossRefGoogle Scholar
[26]Sinkey, J. F.. “Identifying ‘Problem’ Banks: How Do the Banking Authorities Measure a Bank's Risk Exposure?” Journal of Money, Credit and Banking, Vol. 10 (05 1978), pp. 184–193.CrossRefGoogle Scholar
[27]Sinkey, J. F., and Walker, D. A.. “Problem Banks: Identification and Characteristics.” Journal of Bank Research, Vol. 5 (Winter 1975), pp. 208–217.Google Scholar
[28]Spong, K., and Hoenig, T.. “An Examination of Individual Bank Growth.” Journal of Bank Research, Vol. 7 (Winter 1977), pp. 303–310.Google Scholar
[29]Vojta, G. J.Bank Capital Adequacy. New York: Citicorp (1973).Google Scholar
[30]Wilcox, J. W. “A Gambler's Ruin Prediction of Business Failure Using Accounting Data.” Sloan Management Review, Vol. 12 (Spring 1971), pp. 1–10.Google Scholar
[31]Wilcox, J. W.. “A Prediction of Business Failure Using Accounting Data.” Empirical Research in Accounting: Selected Studies (1973), pp. 163–179.Google Scholar
[32]Wilcox, J. W. “The Gambler's Ruin Approach to Business Risk.” Sloan Managemenz Review, Vol. 18 (Fall 1976), pp. 33–46.Google Scholar