mindful of how undercapitalization can create incentives to take on excessive risk. This study proposes a novel framework for … capital regulation that addresses banks' incentives to take on excessive risk and leverage. The framework consists of a … special capital account in addition to a core capital requirement. The special account would accrue to a bank's shareholders …

regular core capital requirement that helps deter excessive risk-taking incentives. The second tier, a novel aspect of our … framework, is a special capital account that limits risk taking but preserves creditors' monitoring incentives …

was widely exposed to systemic risk. The minimization of the systemic risk via a close and detailed monitoring of the … interest expense; the total interest income; the tier 1 (core) risk-based capital; and the total assets. The empirical results …