Abstract
This study explores the relationship between capital ratio, hazard-based capital ratio, capital buffer ratio and portfolio hazard pre, pro and post-crisis time of US banks over the extended period of 2002 and 2018. The overall results show that the capital ratio, all-out risk-based capital ratio and risk-taking are decidedly related. The adjustment in hazard taking against capital ratio is lower during and post-crisis periods. Notwithstanding, the impact of risk-based capital ratio and the capital bufferis negative and more articulated in the post-crisis period than before. The relationship between hazard- taking and capital ratios are heterogeneous for well, sufficiently, undercapitalized, high and low liquid banks. The outcomes have financial ramifications for controllers to define policies.
