Dimensions of Bank Capital Regulation: A Cross-Country Analysis

Abstract

This paper identifies the main dimensions of capital regulation. We use survey data from 142 countries from the World Bank’s (2013) database covering various aspects of bank regulation. Using multiple explorative factor analysis, we identify two main dimensions of capital regulation: complexity of capital regulation and stringency of capital regulation. We show that even countries with a common legal and regulatory framework differ substantially in terms of capital regulation. For example, the level of stringency of capital regulation varies substantially across the EU countries, potentially distorting the level playing field.

Key words: Bank regulation, Capital regulation, Bank capital, Capital structure.
JEL: G20, G21, G28, G32, G38, H81, K23.