Miles et al(2012) in their study of optimal bank capital conclude ‘that
the amount of equity capital that is
likely to be desirable for banks to
use is very much larger than banks
have used in recent years and also
higher than targets agreed under the Basel III framework.’
Within the context of a discussion of how international capital
adequacy rules have developed and
in light of the banking crisis of
2008, critically assess this claim.
Student Assignment Guidelines
Unit 8 of the module notes and Chapter 12 of
Koch and MacDonald (2010) should be
carefully studied in preparation for the assignment.
As there is no one correct way to tackle the question, the following are only
suggestions as to how the assignment might
be tackled. To set the assignment in
context will probably require discussion of
how banks make decisions about their
capital structure. The relationship between
leverage, profitability and the risk of
insolvency might be discussed. What cons
titutes capital and
why regulators have
come to emphasise its importance in unde
rpinning the stability of banks and the
banking system might also be examined. Th
e strengths and weaknesses of the risk-
weighted assets approach to capital ade
quacy contained in the Basel I accord will
probably be discussed. What c
onstitutes capital and why it is important to bank safety
should be analysed in detail. Why Basel II
was regarded as an improvement on its
predecessor should also be discussed. A bala
nced assessment of the merits of Basel I
and II given the collapse of many large
banks around the globe should be provided.
How Basel III attempts to deal with the w
eaknesses in earlier accords revealed by the
financial crisis will also be c
onsidered towards the conclusion.
Note that the assignment askes for a ‘c
ritical’ assessment of the claim by Miles
et al
(2012). Irrespective of the positi
on that is taken on the statement, it is important to justify your position. Credit will be given for assignments that can demonstrate their
knowledge of the relevant material by
offering insights into its limitations and weaknesses. Relevant examples will be used to support the argument and credit will also be given for evidence of wider relevant reading and research.
Use the order calculator below and get started! Contact our live support team for any assistance or inquiry.
[order_calculator]