FRB Study Posits an Optimal Capital Ratio, But We Wonder
On Friday, the FRB released a staff paper modelling optimal capital requirements in a dynamic economy to assess the extent to which relatively simple capital rules – e.g., the Basel counter-cyclical capital buffer (see FSM Report CAPITAL173) – are sufficient to prevent high-risk yield chasing across the business and financial-market cycle.

FRB-NY:  Corporate Insolvency Risk Rises Despite Ultra-Low Rates
The Federal Reserve Bank of New York today released an assessment of corporate debt sustainability that paints a grim picture if U.S. growth does not quickly recover or financial-market sentiment for corporate debt shifts back to risk-off.

Daily081020.pdf