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Publications:
Risk-Based Capital, Portfolio Risk, and Bank Capital: A Simultaneous Equations Approach

by Kevin Jacques and Peter Nigro

OCC Working Paper 94-6, September 1994.

Abstract
This paper examines the impact the recently implemented risk-based standards have had on both bank capital and portfolio risk. To date, little if any attention has focused on how the risk-based capital standards have impacted bank risk and capital levels.

Building on previous research, this paper uses a three-stage least squares (3SLS) model to analyze the relationship between bank capital, portfolio risk, and the risk-based capital standards. The results suggest that the risk-based capital standards had a significant impact on capital and risk levels in well-capitalized banks, but little impact on undercapitalized banks.

Disclaimer
As with all OCC Working Papers, the opinions expressed in this paper are those of the author alone, and do not necessarily reflect the views of the Office of the Comptroller of the Currency or the Department of the Treasury.

Any whole or partial reproduction of material in this paper should include the following citation: Jacques, Kevin, and Peter Nigro, "Risk-Based Capital, Portfolio Risk, and Bank Capital: A Simultaneous Equations Approach," Office of the Comptroller of the Currency, E&PA Working Paper 94-6, September 1994.

Availability

This Economics Working Paper (PDF) is available for viewing in Adobe's PDF format. The PDF viewer is available for download free from Adobe in versions for different platforms.

The complete paper also is available in hard copy from the OCC's Communications Division. If you would like to receive a paper copy of an Economics Working Paper through the U.S. Postal Service:

  • Write to the Communications Division, Mail Stop 2-3, Office of the Comptroller of the Currency, Washington, DC 20219, or
  • Send an e-mail request to the Communications Division at publications@occ.treas.gov.

Be sure to identify the paper(s) you want and to include your complete mailing address, including ZIP code.
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The Office of the Comptroller of the Currency was created by Congress to charter national banks, to oversee a nationwide system of banking institutions, and to assure that national banks are safe and sound, competitive and profitable, and capable of serving in the best possible manner the banking needs of their customers.

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