Bail-In: a sustainable mechanism for rescuing banks

sustainability Article Bail-In: A Sustainable Mechanism for Rescuing Banks Marc Sanchez-Roger 1,*, María Dolores Oliver-Alfonso 1and Carlos Sanchís-Pedregosa 1,2 1Faculty of Economics and Business, University of Seville, Avd. Ramón y Cajal, 1, 41018 Sevilla, Spain; [email protected] (M.D.O.-A.); [email protected] (C.S.-P.) 2Business Department, University of the Pacific, Av. Salaverry 2020 Jesús María, Lima 15072, Peru *Correspondence: marsanr[email protected]; Tel.: +44-7425-680-157 Received: 3 October 2018; Accepted: 15 October 2018; Published: 19 October 2018   Abstract: Until the Great Recession, rescuing banks with taxpayers’ money had been the preferred way to deal with banking crises. The dramatic effects of these practices on the real economy highlighted that bailouts are not a sustainable method to resolve troubled banks going forward. As a result, a new regulatory framework has been proposed, forcing the financial industry to move from “bailout” to “bail-in.” Understanding the implications of such a change is key to ensuring the success of these new banking rules. This article aims to build up a comprehensive and unbiased set of research articles in order to draw conclusions about the current status of the academic literature in the field of capital and loss absorption requirements. A research agenda on the topic is also proposed. The methodological approach undertaken is based on ProKnow-C (Knowledge Development Process-Constructivist). We also contribute to the development of Proknow-C methodology by adding a cross-reference extension to the original framework. The results of our analysis point out that further research has to be undertaken on the subject of loss absorption requirements. Keywords: sustainable finance; banking regulation; ProKnow-C; capital requirements; loss absorption requirements; banking system 1. Introduction The recent financial crisis showed the damage that a disordered banking failure can cause to the real economy. So far, we have seen the use of public funds to resolve troubled entities as the preferred way to deal with banking failures. This has proven to be an unsustainable strategy which entails very high costs for society [1]. Due to the severe impact in social welfare and economic growth of the Global Financial Crisis, governments and regulatory agencies around the world began to work on a new regulatory framework designed to be more sustainable. This led to an in-depth update of the banking rules, including a review of the Basel framework with the release of Basel III [ 2 ]. Moreover, several additional regulations such as the Total Loss Absorption Capacity [ 3 ] or the Minimum Requirement of Eligible Liabilities [ 4 ] were proposed. This new regulatory framework gives the necessary tools to supervisory and resolution agencies to ensure that losses arising in the banking sector will be borne by the bank’s shareholders and creditors and not by taxpayers [5]. This article aims to obtain relevant conclusions on the current status of the literature on the topic of capital and loss absorption requirements. While the literature on capital requirements is large and provides valuable outputs on increasing the effectiveness of bank capital regulation, in this study we observe that academic literature on loss absorption requirements is still in its early stages. The paramount importance of the contributions from academia to governments and regulators for the design of an effective loss absorption framework justifies the relevance of this work. Sustainability 2018,10, 3789; doi:10.3390/su10103789 www.mdpi.com/journal/sustainability Sustainability 2018,10, 3789 2 of 18 We have chosen ProKnow-C as a methodology for this work. ProKnow-C allows one to build up a bibliographic portfolio systemizing the selection of articles and hence reducing the selection bias [ 6 ]. Furthermore, ProKnow-C proposes to develop a bibliometric and systemic analysis with the ultimate goal of proposing a research agenda. This methodology has been increasingly used for the production of literature reviews and other exploratory and descriptive works [ 7 , 8 ]. Furthermore, this work contributes to the development of this methodology by adding a new module to the original framework. The methodological improvement proposed in this study reduces the likelihood of relevant articles being discarded or excluded from the final portfolio by using a cross-reference extension method (snowball-effect). This study suggests that increasing banks’ loss absorption requirements could potentially have spill-over effects on the real economy. We conclude this work by providing a set of research axes to be developed in order to design a loss absorption framework tight enough to mitigate the impacts of a potential financial crisis, but without damaging ex-ante the real economy by hampering the banking sector. Therefore, the results revealed in this paper are key to the development of a more sustainable banking resolution framework. This paper is composed of six sections including this introduction. In section two we describe the theoretical framework. Section three elaborates on the research methodology, while in section four we present the results of the bibliometric and the systemic analyses. Then the discussion section follows, and finally section six concludes. 2. Theoretical Framework The maturity transformation risk that banks shoulder makes the banking business intrinsically risky [ 9 ]. It is shown by the law of large numbers that banks can perform their activities of collecting short-term deposits and lending at long maturities without distortions in a stable and benign scenario [ 9 ]. However, in moments of irrational panic, the law of large numbers fails, leading to a situation of insolvency as a result of a shortfall of liquidity, when suddenly a significant number of deposits are withdrawn at the same time—a bank run. In order to avoid bank runs and with the ultimate goal of preserving the critical functions of banking, a safety net around the banking sector has been established. As defined by Berger et al. (1995), the term “safety net” refers to all government actions, excluding regulation and supervision, designed to enhance the safety and soundness of banks [10]. As explored in many research papers [ 11 – 13 ], the safety net leads to a moral hazard problem, incentivizing banks to bear more than a socially optimal level of risk and substantially increasing the probability of a banking crisis. The complexities and systemic risk issues linked to banks’ defaults lead to the governments’ implicit promise of bailing out troubled entities when they become insolvent. Furthermore, the larger the banks’ total assets, generally the more difficult their liquidation, leading to the well-known problem of “Too Big To Fail” [ 14 ]. Therefore, in addition to the safety net, the implicit promise of bailout exacerbates the moral hazard problem, increasing both banks’ risk appetite and their probability of default. Hence, this represents a major threat to the real economy and the stability of the financial system. Basel standards were designed to reduce systemic instability and bank failures. The first Basel accord was introduced in 1988 [ 15 ] following the Herstatt Bank default in 1973 and the Savings and Loans crisis during the decade of the 1980s. However, the Basel I accord was severely criticized due to its low sensitivity towards the riskiness of the different banks’ exposures and on the possibility of inducing banks to carry out regulatory arbitrages [ 16 , 17 ]. Moreover, the possibility that Basel I triggered the credit crunch which affected the US economy during the decade of the 1990s has been discussed [ 18 ]. As a result of the weaknesses linked to the Basel I framework, in 2004 an updated version of Basel accords, known as Basel II, was released [ 19 ]. Basel II is structured in three main pillars: (i) Minimum capital requirements; (ii) Supervisory review; and (iii) Market discipline. However, Sustainability 2018,10, 3789 3 of 18 the Global Financial Crisis unveiled the significant flaws linked to this updated regulatory framework. As a result, capital requirements are significantly strengthened in terms of both quantity and quality with the release of Basel III in 2010 [ 2 ]. More recently, the critiques linked to the variability of advanced models when determining the capital consumption of bank’s exposures led the Basel Committee on Banking Supervision to review once again the regulatory framework and to release an updated version in late 2017 [20]. On the back of the introduction of Basel accords, an intense debate within the academic world started. The academic literature reveals a trade-off between costs and benefits derived from imposing capital requirements to the banking sector [ 21 – 23 ]. Most of the authors on the topic tend to agree with the fact that amongst the main benefits of capital requirements there are: A decrease in banks’ default probability and a reduction of costs linked to financial instability [21,24,25]. On the other hand, academic literature also states that not all of the effects linked to higher capital requirements are positive. One of the main criticisms of capital requirements is the potential increase in funding costs that banks face on the back of stringent capital regulation. In turn, the increase in the banks’ cost of funding is transferred to the real economy, resulting in a slowdown of the economic growth [25–27]. In line with the above, it is worth highlighting the work developed by Modigliani and Miller in the late 1950s, which as of today still constitutes the framework on which the cost of capital theory is based. The Modigliani-Miller theorem (M&M) points out that in a frictionless world, the design of the capital structure is irrelevant [ 28 ]. Therefore, in line with M&M, increasing the minimum level of capital requirements should not have any effect either on banks’ performance or on the real economy. However, banks do not develop their activities in a frictionless world [ 11 ]. As defined by Berger et al. (1995), amongst the frictions that make capital structure relevant we highlight: (i) Costs of financial distress—which are particularly relevant in the banking sector; (ii) taxation—since interest payments are tax deductible but dividends are not, making the substitution of debt by equity not optimal for shareholders; (iii) transaction costs; (iv) asymmetry of information; and (v) specific sector regulation. Hence, since the M&M propositions seem not to fully apply to banks [ 29 ], it is expected that forcing banks to hold a minimum level of capital above what is described as “market capital requirement” by Berger et al. (1995), could lead to side effects impacting directly both banks and the real economy. In addition to the capital requirements, the new regulatory framework makes special mention to avoid the use of public funds to recapitalize banks. Until the Global Financial Crisis, “bailouts” were the standard method to recapitalize banks. With the new regulation in place, “bailouts” have been replaced by “bail-ins”. This means that from now on, in case of insolvency, banks’ shareholders and debt holders will be the ones in charge of absorbing any potential losses and recapitalizing the banking sector. However, recent banking failures in Europe, such as the case of the Spanish bank Banco Popular [ 30 ] or the precautionary recapitalization of the Italian lender Monte dei Paschi di Siena [ 31 ], have shown that complying with capital requirements does not guarantee an orderly resolution of an entity in case of need. In order to ensure that a bail-in is indeed credible and feasible, it is necessary to ensure that banks hold a minimum level of bail-in-able instruments easily written-down or convertible into equity. For that matter, loss absorption requirements have been proposed [ 3 , 4 ]. Loss absorption capacity ensures that resolution authorities will be able to use the banks’ own funds and certain types of liabilities to absorb losses and recapitalize the bank when the entity is deemed failing or likely to fail. This procedure should be done in an orderly manner, without contagion to other segments of the economy and with no use of public funds [5]. Relying on this regulatory framework, this paper seeks to identify knowledge gaps in the academic literature and to propose a research agenda in order to better understand the implications of the loss absorption requirements to the real economy. Sustainability 2018,10, 3789 4 of 18 3. Methodology The methodology chosen to perform a structured and unbiased analysis of the current status of the academic literature on the subject of capital and loss absorption requirements is ProKnow-C [ 6 ]. An increasing use of the ProKnow-C methodology has been witnessed in several research areas, such as management of public services [ 32 ], management and business [ 33 ] and mobile computing [ 8 ], amongst others. ProKnow-C is, in our view, a particularly useful method for descriptive and exploratory analyses such as literature reviews or research agendas. Next, we elaborate on the application of ProKnow-C and we extend the original method with an additional module which allows one to build-up a more comprehensive final bibliographic portfolio thanks to further exploring the papers quoted in our initial portfolio (snow-ball effect). ProKnow-C is divided in four main steps: (1) Build-up of a bibliographic portfolio; (2) bibliometric analysis of the portfolio; (3) systematic analysis and (4) definition of a research agenda and main objectives [ 34 ]. This paper is an example of a complete application of this research methodology to the field of banking crises resolution and the impact of new regulation on the real economy. In order to select final constituents of the bibliographic portfolio, a threefold approach was followed, consisting of: (a) Creating a gross bibliographic portfolio; (b) filtering and obtaining a net bibliographic portfolio, and (c) applying a methodological innovation to explore cross-reference data to obtain the final bibliographic portfolio. Figure 1synthesizes the main steps of this methodology. Sustainability 2018, 10, x FOR PEER REVIEW 4 of 19 3. Methodology The methodology chosen to perform a structured and unbiased analysis of the current status of the academic literature on the subject of capital and loss absorption requirements is ProKnow-C [6]. An increasing use of the ProKnow-C methodology has been witnessed in several research areas, such as management of public services [32], management and business [33] and mobile computing [8], amongst others. ProKnow-C is, in our view, a particularly useful method for descriptive and exploratory analyses such as literature reviews or research agendas. Next, we elaborate on the application of ProKnow-C and we extend the original method with an additional module which allows one to build-up a more comprehensive final bibliographic portfolio thanks to further exploring the papers quoted in our initial portfolio (snow-ball effect). ProKnow-C is divided in four main steps: (1) Build-up of a bibliographic portfolio; (2) bibliometric analysis of the portfolio; (3) systematic analysis and (4) definition of a research agenda and main objectives [34]. This paper is an example of a complete application of this research methodology to the field of banking crises resolution and the impact of new regulation on the real economy. In order to select final constituents of the bibliographic portfolio, a threefold approach was followed, consisting of: (a) Creating a gross bibliographic portfolio; (b) filtering and obtaining a net bibliographic portfolio, and (c) applying a methodological innovation to explore cross-reference data to obtain the final bibliographic portfolio. Figure 1 synthesizes the main steps of this methodology. Figure 1. ProKnow-C methodology. Source: Authors. Adapted from Reference [34]. The first stage consists of creating the gross bibliographic portfolio by establishing research definitions. Therefore, at this stage we defined the initial criteria that will be used to obtain the gross stock of references (gross portfolio). In line with ProKnow-C, the definition of the research axes and the key words linked to each one was the first step in this methodology. While in the case of capital requirements the academic Figure 1. ProKnow-C methodology. Source: Authors. Adapted from Reference [34]. The first stage consists of creating the gross bibliographic portfolio by establishing research definitions. Therefore, at this stage we defined the initial criteria that will be used to obtain the gross stock of references (gross portfolio). In line with ProKnow-C, the definition of the research axes and the key words linked to each one was the first step in this methodology. While in the case of capital requirements the academic literature Sustainability 2018,10, 3789 5 of 18 is sizeable, this is not the case for loss absorption requirements. Regarding the latter, non-academic research has been growing substantially in the last few years, with contributions from the Financial Stability Board, the Bank for International Settlements and the European Banking Authority amongst others. However, as addressed at a later stage of this work, the existing non-academic literature is not developed enough to cover relevant topics that should be further studied from a pure academic research angle. It is worth highlighting that the current non-academic literature has been useful for this work, particularly for methodological purposes and especially to define the research axes and keywords. Capital requirements and loss absorption requirements are two concepts of paramount importance with regard to the subject under study; hence these concepts were used as research axes in our methodology. The key words related to loss absorption have been selected on the basis of relevance and frequency of use in the current non-academic literature. In the case of capital requirements, we relied on existing academic literature for choosing the key-words. Next, we show the two research axes and keywords: •Axis 1: Capital requirements. Key words: bank capital; capital requirement; bank regulation. •Axis 2: Loss absorption requirements. Key words: bail-in; bank resolution. The next step consisted of running Boolean searches in Web of Science and Scopus databases combining the keywords abovementioned. Initially we found 4166 results in Web of Science database and 5145 in Scopus. Following ProKnow-C methodology, the second stage consisted of filtering the gross selection of articles (gross portfolio) in order to obtain the final bibliographic portfolio. This second stage was subdivided in six additional steps: (i) Filter duplicates; (ii) filter by publication date; (iii) filter by title; (iv) filter by abstract; (v) filter by scientific relevance; and (vi) filter by full article alignment. After performing these filters, a bibliographic portfolio of 186 articles is obtained. The final step represents a methodological innovation that we introduce in this paper. The alternative that we propose consists of adding a cross-reference module to the original ProKnow-C framework as can be observed in Figure 1. This methodological upgrade allows the expansion of the initial bibliographic portfolio by adding articles found within the references of the initial net portfolio. We ran this cross-reference search two times, increasing the final portfolio from 186 references to 241. We conclude this section by mentioning the potential limitations of the portfolio obtained. The literature on the topic is extremely large, making the task of defining the boundaries of the final portfolio very difficult. Therefore, we consider that the potential authors’ biases when applying filters to the gross portfolio could have an impact on the final sample, although in a lower measure thanks to the use of ProKnow-C methodology. 4. Results In this section, we report the results obtained from both the bibliometric and the systemic analyses. 4.1. Bibliometric Analysis This section analyzes the bibliometric characteristics of our final bibliographic portfolio following the methodology applied in works of similar nature focused on obtaining bibliometric data from a sample of articles [6,7]. Figure 2shows the relevance and volume of publications per year on the topic under analysis. Axis X describes the publication year, the number of articles published per year is shown in axis Y, and the total number of citations per year is represented by the size of the bubble. Sustainability 2018,10, 3789 6 of 18 Sustainability 2018, 10, x FOR PEER REVIEW 6 of 19 Figure 2. Articles and publication dates. Figure 3 represents the relevance ratio, a bibliometric measure developed by taking into account the number of papers by author (axis X), the total citations per author (axis Y) and the average impact factor of the journals the author has published in (bubble size). In order to classify the articles by relevance, we used the number of citations per article using Google Scholar. The figure below displays the relevance ratio for authors with more than 700 citations or more than one contribution to the portfolio. Figure 3. Relevance ratio. Table 1 summarizes the main metrics for the journals that, according to our research, are the most relevant in the field of bank capital and loss absorption requirements. Journals are sorted by frequency, followed by Q-factor and by 5 year impact factor. Figure 2. Articles and publication dates. Figure 3represents the relevance ratio, a bibliometric measure developed by taking into account the number of papers by author (axis X), the total citations per author (axis Y) and the average impact factor of the journals the author has published in (bubble size). In order to classify the articles by relevance, we used the number of citations per article using Google Scholar. The figure below displays the relevance ratio for authors with more than 700 citations or more than one contribution to the portfolio. Sustainability 2018, 10, x FOR PEER REVIEW 6 of 19 Figure 2. Articles and publication dates. Figure 3 represents the relevance ratio, a bibliometric measure developed by taking into account the number of papers by author (axis X), the total citations per author (axis Y) and the average impact factor of the journals the author has published in (bubble size). In order to classify the articles by relevance, we used the number of citations per article using Google Scholar. The figure below displays the relevance ratio for authors with more than 700 citations or more than one contribution to the portfolio. Figure 3. Relevance ratio. Table 1 summarizes the main metrics for the journals that, according to our research, are the most relevant in the field of bank capital and loss absorption requirements. Journals are sorted by frequency, followed by Q-factor and by 5 year impact factor. Figure 3. Relevance ratio. Table 1summarizes the main metrics for the journals that, according to our research, are the most relevant in the field of bank capital and loss absorption requirements. Journals are sorted by frequency, followed by Q-factor and by 5 year impact factor. Finally, we conclude the bibliometric analysis with Table 2, where an analysis of the most repeated keywords in our bibliometric portfolio is shown. Sustainability 2018,10, 3789 7 of 18 Table 1. Journals and metrics. Journal Number of Articles H-Index 2016 Impact Factor Q-Factor Journal of Banking and Finance 37 117 1.767 Q1 Journal of Financial Stability 15 30 1.432 Q1 Journal of Financial Intermediation 11 59 2.961 Q1 Journal of Finance 9 233 20.973 Q1 Journal of Money, Credit and Banking 8 84 2.487 Q1 Journal of Financial Services Research 7 40 0.667 Q2 Review of Financial Studies 5 135 12.989 Q1 International Journal of Central Banking 5 17 1.671 Q1 Economic Modelling 4 45 0.959 Q2 Journal of Economics and Business 4 40 0.436 Q2 American Economic Review 3 223 10.490 Q1 Journal of the European Economic Association 3 66 0.768 Q1 Journal of Macroeconomics 3 34 0.675 Q2 International Review of Financial Analysis 3 35 0.789 Q2 European Business Organization Law Review 3 12 0.308 Q2 Financial Markets, Institutions and Instruments 3 18 0.307 Q3 Others 115 42 1.557 Q1 = 25% Table 2. Keywords. Keywords Frequency Keywords Frequency Capital Requirements 26 Bank 5 Bank Capital 25 Bank Lending 5 Bank Regulation 22 Basel 5 Financial Crisis 17 Basel II 5 Banking 13 Capital Ratios 5 Basel III 13 Capital Structure 5 Capital Regulation 13 Contingent Capital 5 Banking Regulation 11 Credit Risk 5 Capital 11 Financial Institutions 5 Regulation 10 Subordinated Debt 5 Credit Crunch 9 Bank Failures 4 Deposit Insurance 9 Basel Accord 4 Systemic Risk 9 Capital Adequacy 4 Bailout 8 Capital Adequacy Ratio 4 Banks 8 Capital Adequacy Requirements 4 Bail-In 7 Financial Stability 4 Banking Crisis 6 Model 4 Business Cycles 6 Moral Hazard 4 Capital Buffers 6 Regulatory Capital Requirements 4 Market Discipline 6 Risk 4 Procyclicality 6 Too Big To Fail 4 4.2. Systematic Analysis A coded and structured classification of the information has been applied in this section. This is in line with the methodology chosen by other exploratory and descriptive works [35–37]. We structured the information obtained from the bibliographic portfolio in 10 fields, involving a codification with letters. We have classified the information in the fields shown below. Appendix A shows in detail the codification proposed for each of the fields. •Study type: Relates to the empirical or theoretical nature of the study. •Approach: Refers to whether the study follows a qualitative or quantitative approach. •Geographic scope: Relates to the country or region under study. • Geographic context: Determines whether the country or region under study is a developed or emerging economy. •Data period: Relates to the temporal period of the data used for the study. Sustainability 2018,10, 3789 8 of 18 •Years under study: Refers to the number of years contained in the study’s data sample. •Data type: Relates to the type and source of data used in the analysis. •Focus: Relates to the topic under study. •Positive impact: Relates to the positive impacts in different fields of the focus of the study. •Negative impact: Refers to the negative impacts to the focus under study. Table 3classifies the different studies included in our final portfolio into the categories “quantitative”, “qualitative” or a combination of the two, “both.” It also details whether the works should be classified as empirical, theoretical or both. Finally, Table 3also provides information regarding the economic context and the geography under analysis. Table 3. Type of study and other metrics. Quantitative Qualitative Both Frequency 41% 44% 15% Empirical 80 - 13 Theoretical 11 106 5 Both 8 - 18 Developed 72 18 28 Developing 9 - 3 Both 9 - 2 N/A 9 88 3 US 29 8 12 EU/UK 30 7 11 US & EU/UK 2 1 - Rest of the world 13 - 3 Worldwide 16 2 7 N/A 9 88 3 Figure 4summarizes the main conclusions regarding the impacts of bank capital requirements to the financial sector and to the broader economy. It visually represents the main conclusions of the group of 84 articles within our portfolio that are focused on determining the impacts of capital requirements. Axis X displays the frequency of positive impacts derived from forcing banks to hold a minimum level of regulatory capital, while in axis Y the negative impacts are compiled. Sustainability 2018, 10, x FOR PEER REVIEW 9 of 19 Figure 4. Cost-benefit analysis of capital requirements. Table 4 compiles the sources of the data used in the different papers included in the final portfolio. The data input source has been classified into five categories: (i) Financial statements; (ii) macro and regulatory data; (iii) market data; (iv) other data, and (v) N/A, linked almost exclusively to pure theoretical papers. Table 4. Input data. Combination 2 Data Types Combination more than 2 Data Types Financial Statements Macro and Regulatory Market Other N/A Macro and Regulatory, Market Macro and Regulatory, Other Market, Other Financial Statements 48 20 6 7 - 8 1 - Macro and Regulatory - 12 3 7 - - - 1 Market - - 7 6 - - - - Other - - - 2 - - - - N/A - - - - 113 - - - Table 5 classifies the papers by topic in accordance with the categories defined in Appendix A. It also synthesizes the information related to the approach followed and the timeframe analyzed. Therefore, Table 5 provides clarity on the potential gaps in the literature and seeks to detect any concentration of data at any particular point of time that could bias the conclusions of the analysis. Table 5. Focus of the study. Capital Requirements: Definition and Theory Capital Requirements: Impact Loss Absorbtion Requirements: Definition and Theory Other Frequency 42% 35% 21% 2% Quantitative 33 56 9 1 Qualitative 52 16 36 2 Both 17 12 6 1 Up to 2 years data 7 7 4 - From 2 to 5 years data 6 9 2 - From 5 to 10 years data 12 12 5 - More than 10 years data 23 34 6 2 N/A 54 22 34 2 Post GFC 2 5 5 - Pre GFC 29 31 6 2 Incl. Both periods 17 26 6 - N/A 54 22 34 2 Figure 4. Cost-benefit analysis of capital requirements. Table 4compiles the sources of the data used in the different papers included in the final portfolio. The data input source has been classified into five categories: (i) Financial statements; (ii) macro and Sustainability 2018,10, 3789 9 of 18 regulatory data; (iii) market data; (iv) other data, and (v) N/A, linked almost exclusively to pure theoretical papers. Table 4. Input data. Combination 2 Data Types Combination More Than 2 Data Types Financial Statements Macro and Regulatory Market Other N/A Macro and Regulatory, Market Macro and Regulatory, Other Market, Other Financial Statements 48 20 6 7 - 8 1 - Macro and Regulatory - 12 3 7 - - - 1 Market - - 7 6 - - - - Other - - - 2 - - - - N/A - - - - 113 - - - Table 5classifies the papers by topic in accordance with the categories defined in Appendix A. It also synthesizes the information related to the approach followed and the timeframe analyzed. Therefore, Table 5provides clarity on the potential gaps in the literature and seeks to detect any concentration of data at any particular point of time that could bias the conclusions of the analysis. Table 5. Focus of the study. Capital Requirements: Definition and Theory Capital Requirements: Impact Loss Absorbtion Requirements: Definition and Theory Other Frequency 42% 35% 21% 2% Quantitative 33 56 9 1 Qualitative 52 16 36 2 Both 17 12 6 1 Up to 2 years data 7 7 4 - From 2 to 5 years data 6 9 2 - From 5 to 10 years data 12 12 5 - More than 10 years data 23 34 6 2 N/A 54 22 34 2 Post GFC 2 5 5 - Pre GFC 29 31 6 2 Incl. Both periods 17 26 6 - N/A 54 22 34 2 5. Discussion After the release of the Basel I accords, the frequency of articles published on the topic of bank capital regulation by prestigious journals increased dramatically. Figure 2shows that both the volume of publications and cites per article surged from the mid-1990s onwards. Interestingly, however, during the years before the start of the Global Financial Crisis (GFC) the number of papers on the topic declined, observing a boost just after the beginning of the crisis. At present, the interest in the subject is very high, with 19 articles in our portfolio being published in 2017, 16 articles in 2016 and 21 articles in 2015. This compares with an average number of articles published per year of 8.6 during the period from 1995 to 2014. Nonetheless, despite the increase in the frequency of publications after the GFC, we observe that the works that build-up the theoretical framework were mainly published in the period from 1988 to 2000. In line with the above, the most relevant articles included in our portfolio by number of citations are: “A theory of bank capital” [ 24 ] with 1363 citations, “Risk in banking and capital regulation” [ 25 ] with 1153, “The role of capital in financial institutions” [ 11 ] with 1037, and “The relationship between capital and earnings in banking” [ 10 ] with 1022. 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