The Structure of Banks' Assets in Terms of Portfolio Theory and Bank Capital Regulation
The Structure of Banks' Assets in Terms of Portfolio Theory and Bank Capital Regulation

Author(s): Ján Horvát, Eva Horvátová
Subject(s): Business Economy / Management, Financial Markets, Accounting - Business Administration
Published by: Masarykova univerzita nakladatelství
Keywords: bank assets portfolio; portfolio risk;
Summary/Abstract: In the period of the financial crisis, the current question is how banks should invest, as interest rates and market yields are low, and capital growth is required as a result of bank regulation requirements. Balancing between risk and return in the banking sector is still sustaining and contributing to the pro-cyclical behavior of banks. This article addresses the question whether it is appropriate to undertake a high risk in the banking sector and whether the risk is adequately compensated by adequate returns. It compares the portfolio risk of traditional loans and portfolio of securities eligible for inclusion into the HTM (Held to Maturity) portfolio.

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