International Prudential Regulation, Regulatory Risk and the Cost of Bank Capital

We define regulatory risk as any regulatory action that leads to an increase in the cost of capital for the regulated firm. In a general equilibrium setting the paper considers the impact of globally harmonising capital adequacy requirements on the cost of bank equity capital. The results show that uniform increases in capital requirements lead to an increase in the cost of capital. However when regulatory standards differ across countries, financial integration leads to positive spillovers which reduces the cost of capital mark up for a given increase in bank capital. Accordingly, regulatory risk may be greater under a regulatory agreement such as the Basel Accord which imposes international uniformity in capital ratios.

Endogenous Capital and Profitability in Banking

This paper investigates the relation between bank capital and profitability. To my knowledge, no previous paper has analysed this problem in a two-equation structural model. Contrary to what is reported with surprising frequency in this field of research, the results show no statistically significant relationship between capital and profitability. Given non-binding capital requirements this finding is consistent with the view that, while raising capital is costly for banks, it is associated with compensating benefits that offset these additional costs. Consequently, when capital structure is endogenously determined in a profit maximising equilibrium, no systematic relation between capital and profit is expected.

A Theory of Precautionary Regulatory Capital in Banking

The orthodox assumption in the banking literature is that capital requirements are a binding constraint on banking behaviour. This is in conflict with the empirical observation that banks hold a bu¤er of capital well in excess of the minimum requirements. This paper develops a model where capital is endogenously determined within a profit maximising equilibrium. Optimality involves balancing the reduction in expected costs associated with regulatory breach with the excess cost of financing from increasing capital. We demonstrate that when the equilibrium probability of regulatory breach is less than one half, banks are expected to hold precautionary capital.

Noncanonical Amino Acids in the Interrogation of Cellular Protein Synthesis

Proteins in living cells can be made receptive to bioorthogonal chemistries through metabolic labeling with appropriately designed noncanonical amino acids (ncAAs). In the simplest approach to metabolic labeling, an amino acid analog replaces one of the natural amino acids specified by the protein’s gene (or genes) of interest. Through manipulation of experimental conditions, the extent of the replacement can be adjusted. This approach, often termed residue-specific incorporation, allows the ncAA to be incorporated in controlled proportions into positions normally occupied by the natural amino acid residue. For a protein to be labeled in this way with an ncAA, it must fulfill just two requirements: (i) the corresponding natural amino acid must be encoded within the sequence of the protein at the genetic level, and (ii) the protein must be expressed while the ncAA is in the cell. Because this approach permits labeling of proteins throughout the cell, it has enabled us to develop strategies to track cellular protein synthesis by tagging proteins with reactive ncAAs. In procedures similar to isotopic labeling, translationally active ncAAs are incorporated into proteins during a “pulse” in which newly synthesized proteins are tagged. The set of tagged proteins can be distinguished from those made before the pulse by bioorthogonally ligating the ncAA side chain to probes that permit detection, isolation, and visualization of the labeled proteins. Noncanonical amino acids with side chains containing azide, alkyne, or alkene groups have been especially useful in experiments of this kind. They have been incorporated into proteins in the form of methionine analogs that are substrates for the natural translational machinery. The selectivity of the method can be enhanced through the use of mutant aminoacyl tRNA synthetases (aaRSs) that permit incorporation of ncAAs not used by the endogenous biomachinery. Through expression of mutant aaRSs, proteins can be tagged with other useful ncAAs, including analogs that contain ketones or aryl halides. High-throughput screening strategies can identify aaRS variants that activate a wide range of ncAAs. Controlled expression of mutant synthetases has been combined with ncAA tagging to permit cell-selective metabolic labeling of proteins. Expression of a mutant synthetase in a portion of cells within a complex cellular mixture restricts labeling to that subset of cells. Proteins synthesized in cells not expressing the synthetase are neither labeled nor detected. In multicellular environments, this approach permits the identification of the cellular origins of labeled proteins. In this Account, we summarize the tools and strategies that have been developed for interrogating cellular protein synthesis through residue-specific tagging with ncAAs. We describe the chemical and genetic components of ncAA-tagging strategies and discuss how these methods are being used in chemical biology