Raising Capital or Improving Risk Management and Efficiency

This chapter takes into consideration the raising of capital from time to time or the improving of risk management and efficiency from one period to another in the context of banks. The raising of capital is the main tool used by regulation on a prudential application and by supervision on a discretional application in order to maintain the viability of the banking system. Capital requirements are calculated through Basel III and the forthcoming Basel IV; they are also imposed as an additional tool through discretional decisions by supervisory authorities. This can be viewed as a form of “recurrent stressing” to be imposed on banks as a means of pursuing the stability objective. It is important to point out that capital raising is useful only in order to hedge the solvency risk at the specific date examined and only if the solvency risk is correctly estimated.