Optimal Bank Capital

David Miles, Gilberto Marcheggiano, Jing Yang, Mon, 04/11/2011

The authors of CEPR DP8333 assess the optimal level of equity for banks to hold, taking into account costs and benefits both private and social. After considering these overall economic (or social) costs, the authors conclude that desirable equity levels for banks are far higher than actual levels or even target levels under Basel III.

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URL: www.cepr.org/DP8333

Topics: Financial markets Global economy International finance

Tags: banks, capital regulation, capital structure, cost of equity, leverage and Modigliani-Miller