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Regulation of Financial Institutions – Fall 2015

Class Ten -- October 1, 2014

We will begin with a Harvard Business School case titled First National Bank Corporation (A), which looks at capital requirements from the perspective of a bank in the early 1990's. What would you recommend the bank do? Next review the Excerpt on Capital Adequacy from The Regulation of Financial Institutions, focusing on the Coushatta case (pages 153 to 162). Then try your hand at Problems 3-20 and 3-21 on page 163, applying the capital rules as described on pages 149-152 (now referred to as Basel I). If time permits, you might want to skim the Winstar decision, which explores some interesting constitutional issues that arose when Congress strengthened capital requirements in the late 1980's.