01719cas a2200241 a 4500 AALejournalIMF002035 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451854831 1018-5941 BD-DhAAL BD-DhAAL Kupiec, Paul. Internal Models-Based Capital Regulation and Bank Risk-Taking Incentives / Paul Kupiec. Washington, D.C. : International Monetary Fund, 2002. 1 online resource (32 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students Advocates for internal model-based capital regulation argue that this approach will reduce costs and remove distortions that are created by rules-based capital regulations. These claims are examined using a Merton-style model of deposit insurance. Analysis shows that internal model-based capital estimates are biased by safety-net-generated funding subsidies that convey to bank shareholders when market and credit risk regulatory capital requirements are set using bank internal model estimates. These subsidies are not uniform across the risk spectrum, and, as a consequence, internal model regulatory capital requirements will cause distortions in bank lending behavior. Mode of access: Internet IMF Working Papers; Working Paper ; No. 2002/125 Full text available on IMF http://elibrary.imf.org/view/journals/001/2002/125/001.2002.issue-125-en.xml IMF e-Library