Beware of capital: much ado about nothing?
Capital increases can be offset by asset valuation, provision and income recognition forbearance
Bank regulators worldwide are currently fixated on reinforcing capital. There’s a good reason for this: capital is fundamental. But, under the surface, this appears to be a nominal rather than effective fixation, at least judging by the questionable quality of some of the components of minimum capital required by regulators in Europe and elsewhere. Moreover, paradoxically, the regulatory and supervisory emphasis on capital comes hand in hand with a trend, observed in several countries, to
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