01798cas a2200253 a 4500 AALejournalIMF004460 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451864755 1018-5941 BD-DhAAL BD-DhAAL Sy, Amadou. Distance-to-Default in Banking : A Bridge Too Far? / Amadou Sy, Jorge Chan-Lau. Washington, D.C. : International Monetary Fund, 2006. 1 online resource (17 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 In contrast to corporate defaults, regulators typically take a number of statutory actions to avoid the large fiscal costs associated with bank defaults. The distance-to-default, a widely used market-based measure of corporate default risk, ignores such regulatory actions. To overcome this limitation, this paper introduces the concept of distance-to-capital that accounts for pre-default regulatory actions such as those in a prompt-corrective-actions framework. We show that both risk measures can be analyzed using the same theoretical framework but differ depending on the level of capital adequacy thresholds and asset volatility. We also use the framework to illustrate pre-default regulatory actions in Japan in 2001-03. Mode of access: Internet Chan-Lau, Jorge. IMF Working Papers; Working Paper ; No. 2006/215 Full text available on IMF http://elibrary.imf.org/view/journals/001/2006/215/001.2006.issue-215-en.xml IMF e-Library