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A Review of the Regulatory Impact Analysis of Risk-Based Capital and Related Liquidity Rules

American Institute for Economic Research, Great Barrington, MA 01230, USA
For helpful comments and suggestions, the author thanks Stephen Miller, three anonymous reviewers, and session participants at the AIER Sound Money Project annual meeting. The author thanks David Schatz and Justin Wang for editing assistance.
J. Risk Financial Manag. 2021, 14(1), 24; https://doi.org/10.3390/jrfm14010024
Received: 23 September 2020 / Revised: 15 December 2020 / Accepted: 29 December 2020 / Published: 6 January 2021
(This article belongs to the Section Banking and Finance)
This paper reviews the cost-benefit analysis, or “regulatory impact analysis” (RIA), in US bank regulators’ risk-based capital (RBC) rule proposals. We review the principles of cost-benefit analysis and its application by US bank regulators. We provide a brief background on RBC rules and review the literature on their costs and benefits. We then evaluate 27 proposed RBC rules and related rules on bank liquidity. We find that nine of the 27 rules include RIAs. Five of the RIAs claim the proposed rule will create net benefits, but none provide quantitative evidence that the benefits exceed the costs. In two proposals, the evidence cited indicates the rules’ net benefits may actually be negative. View Full-Text
Keywords: banks; capital; risk-based capital; regulation; cost-benefit analysis banks; capital; risk-based capital; regulation; cost-benefit analysis
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MDPI and ACS Style

Hogan, T.L. A Review of the Regulatory Impact Analysis of Risk-Based Capital and Related Liquidity Rules. J. Risk Financial Manag. 2021, 14, 24. https://doi.org/10.3390/jrfm14010024

AMA Style

Hogan TL. A Review of the Regulatory Impact Analysis of Risk-Based Capital and Related Liquidity Rules. Journal of Risk and Financial Management. 2021; 14(1):24. https://doi.org/10.3390/jrfm14010024

Chicago/Turabian Style

Hogan, Thomas L. 2021. "A Review of the Regulatory Impact Analysis of Risk-Based Capital and Related Liquidity Rules" Journal of Risk and Financial Management 14, no. 1: 24. https://doi.org/10.3390/jrfm14010024

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