On December 12, 2019, Fed in Print will introduce its new platform for discovering content. Please direct your questions to Anna Oates

Home About Latest Browse RSS Advanced Search

Federal Reserve Bank of St. Louis
Review
An Empirical Economic Assessment of the Costs and Benefits of Bank Capital in the United States
Simon Firestone
Amy Lorenc
Benjamin Ranish
Abstract

We evaluate the economic costs and benefits of bank capital in the United States. The analysis is similar to that found in previous studies, though we tailor it to the specific features and experience of the U.S. financial system. We also make adjustments to account for the impact of liquidity- and resolution-related regulations on the probability of a financial crisis. We find that the level of capital that maximizes the difference between total benefits and total costs ranges from just over 13 percent to 26 percent. This range reflects a high degree of uncertainty and latitude in specifying important study parameters that have a significant influence on the resulting optimal capital level, such as the output costs of a financial crisis or the effect of increased bank capital on economic output. Finally, the article discusses a range of considerations and factors that are not included in the cost-benefit framework that could have a substantial impact on estimated optimal capital levels.


Download Article Full text
Download Issue Full text
Cite this item
Simon Firestone & Amy Lorenc & Benjamin Ranish, "An Empirical Economic Assessment of the Costs and Benefits of Bank Capital in the United States" , Federal Reserve Bank of St. Louis, Review, volume 101, issue 3, pages 203-230, 2019.
More from this series
JEL Classification:
Subject headings:
DOI: 10.20955/r.101.203-30
For corrections, contact Anna Oates ()
Fed-in-Print is the central catalog of publications within the Federal Reserve System. It is managed and hosted by the Economic Research Division, Federal Reserve Bank of St. Louis.

Privacy Legal