Accounting and Theories of Management, One Important Support of Albanian Reality to Distinguishing Financially Business Development in EU Countries

Abstract

The preceding discussion of risk management strategies has neglected the possibility that a bank might simply have more equity so as to have a larger buffer against the risks that it faces. This is of course the strategy that underlies the Basle Committee's thinking about capital adequacy regulation. The problem is that as given it is not a well defined strategy at all. If we think of a bank faced with repeated risks in a dynamic context, the question is how equity can be adjusted over time. In the banking literature the arguments have generally been phrased in terms of capital regulation. Thus, for instance managers’ incentives to gamble for resurrection at some point could be contained by prescribing some level of capital. Other, non-capital instruments to control risk might however be just as effective. One could think of, for instance, direct supervision instead. Generally, such measures can be accommodated within the existing, capital-focus literature.

DOI: 10.5901/ajis.2013.v2n1p361