July 2016

Bank Capital Regulations around the World: What Explains the Differences?

Gazi Ishak Kara


Despite the extensive attention that the Basel capital adequacy standards have received internationally, significant variation exists in the implementation of these standards across countries. Furthermore, a significant number of countries increase or decrease the stringency of capital regulations over time. The paper investigates the empirical determinants of the variation in the data based on the theories of bank capital regulation. The results show that countries with high average returns to investment and a high ratio of government ownership of banks choose less stringent capital regulation standards. Capital regulations may also be less stringent in countries with more concentrated banking sectors.

Accessible materials (.zip)

Keywords: Basel capital accord, Capital requirements, Financial regulation, international policy coordination

DOI: http://dx.doi.org/10.17016/FEDS.2016.057

PDF: Full Paper

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Last Update: June 19, 2020