Abstract
Risk-based capital standards for large banks have been adopted by the central banks of the advanced industrialized countries for full implementation in December 1992. This paper examines the impact of these new standards in nine European countries and the United States between 1989-91 during Ule transition period. Banks in both Europe and the U.S. have increased their Tier I ratios while only U.S. banks have increasedTier III ratios each year. The primary adjustment mechanism to increase risk-based capital has been through changes in asset mix rather than through increases in stockholder's equity. A model to explain changes in risk-based capital found changes in net interest margin positively related to changes in risk-based capital.