Five Questions: Anat Admati Says More Bank Equity Is Needed

Many bankers insist that more equity on bank balance sheets would crimp their ability to lend. Sure, they will impose rigorous covenants on nonfinancial corporate borrowers that operate with less than 40 percent equity, but 13 percent for the banks’ own looks more than ample to JPMorgan Chase chairman Jamie Dimon. Of the extra cushion, he says, “this is capital that we don’t need.”

胡说，乔治·纳特尼说，乔治·纳特尼斯坦福大学财经经济学教授。谁是银行家在开玩笑吧？它是银行业务的高杠杆，缺陷的监管和补偿结构 - 而不是更多的股权 - 限制贷款能力。

Admati is a co-author of “Debt Overhang and Capital Regulation” with Stanford University colleagues Peter DeMarzo and Paul Pfleiderer and Martin Hellwig from the Max Planck Institute in Bonn, Germany. They published the research paper in March, a sequel to earlier research. Their recent conclusion: “High equity requirements for banks bring about large benefits at essentially no relevant social cost. Banks funded with much more equity would be able to serve the economy better, without subjecting it to excessive risks and costs.”

亚博赞助欧冠contributor Steven Mintz spoke recently with Professor Admati about the case for more equity on bank balance sheets.

What persuades you and your co-authors that higher equity requirements would be so beneficial?

Three key reasons. One, better capitalized banks can absorb losses without creating system-wide financial instability. Second, banks with more equity are less burdened by debt overhang so they can raise funds more easily for new loans. And three, higher equity requirements might give pause to banks before they embark on riskier investments that fueled the financial crisis. In addition to requiring too little equity, flawed current regulations use a system of risk weights to specify the equity requirements. The risk tier weighting system favors marketable securities and other structured investment and derivatives over lending to productive companies in the real economy that can help the economy grow.

What about market consequences if banks must add equity to their balance sheets?

It sounds counterintuitive. Shareholders and managers of highly leveraged banks, those whose investments are concentrated in the banks, resist leverage reduction even if the bank’s total value might increase. High leverage works for bankers whose bonuses are pegged to return on equity, but not for the rest of us. Reducing leverage benefits existing creditors and taxpayers who ultimately guarantee the debt. When high leverage rewards bank managers but exposes third parties to risk, or externalities, you get social inefficiencies. That’s because most shareholders own bank stocks in diversified portfolios and they pay taxes. If undercapitalized banks trigger another financial crisis, the vast majority of shareholders are likely net losers.

银行家预测的其他不良后果怎么样？

银行表示，他们的成本将上升，但他们给出了谬误的原因，从未提到任何此类成本降低的主要原因是他们的借款通过担保和税收补贴。只有有效的原因，银行的否则根本不得资助20％至30％的公平。它不会损害他们为经济做任何事情的能力，同时带来了很大的利益。

Bankers cloud the issue. Equity is not idle cash. Equity is held by shareholders and invested in loans and other investments. Safer banks with more equity would add incentives to write sound loans and reduce reason to favor risky investments that increase bankers’ compensation but make the financial system more fragile.

Why don’t rule makers hear your message?

困惑的组合和世界各地的捕获形式。危机揭示了法规和执行失败，但似乎难以实现有效的变化。缺陷的风险重量允许巨大的系统风险积累。银行，特别是在欧洲，投资失败被监管机构安全。政治是复杂的。许多行业的大厅，但没有人像银行业一样，他们似乎有影响。

监管机构对这个问题有所了解，但他们害怕该行业。模型静脉，可以用作封面。他们让银行支付不必要地耗尽公平的股息，不要充分审查这些问题。在外面的一切都很长，因为风险加权和会计技巧隐瞒风险。但这仍然是一个高度危险的系统。

How do you propose banks build equity when stock prices are low?

The best way to increase equity is to stop payouts through dividends or share buybacks. I’d happily give up my dividends to build up capital and a more stable banking system.