Discussion Papers 2017

CIRJE-J-288	『銀行業における資本』 "Capital in Banking"
Author Name	江原慶 (Kei Ehara)
Date	July 2017
Full Paper	PDF file (only Japanese version available)
Remarks

Abstract (in Japanese)	Abstract (in English)
	The purpose of this paper is to clarify the concept of capital in banking as the foundation for understanding our financial system. Though Japanese Marxian economists have accumulated theoretical studies on credit system, we do not yet have a clear-cut idea of what capital is in banking. Nevertheless, we must identify it if we are to properly analyse recent financial expansion and unconventional monetary policies. K. Marx's Capital gives us a hint to solve this issue. In section 1, we read the text of Capital Vol.3 to grasp the points of argument. While Marx mainly discusses "fictitious capital", we cannot miss his notice on a net worth of banks. In section 2, we develop the latter concept on capital of Marx as reserves for non-performing loans. Banks try to maintain and reinforce their credibility on the basis of the capital, thereby enlarging the scale of their asset under the competition. The growth of the asset leads to more profit even if the interest rate is constant. Financial booms boost the growth of the asset of banks without maintaining their credibility, consequently making the banking asset fairly vulnerable.

Abstract (in Japanese)

Abstract (in English)

The purpose of this paper is to clarify the concept of capital in banking as the foundation for understanding our financial system. Though Japanese Marxian economists have accumulated theoretical studies on credit system, we do not yet have a clear-cut idea of what capital is in banking. Nevertheless, we must identify it if we are to properly analyse recent financial expansion and unconventional monetary policies. K. Marx's Capital gives us a hint to solve this issue. In section 1, we read the text of Capital Vol.3 to grasp the points of argument. While Marx mainly discusses "fictitious capital", we cannot miss his notice on a net worth of banks. In section 2, we develop the latter concept on capital of Marx as reserves for non-performing loans. Banks try to maintain and reinforce their credibility on the basis of the capital, thereby enlarging the scale of their asset under the competition. The growth of the asset leads to more profit even if the interest rate is constant. Financial booms boost the growth of the asset of banks without maintaining their credibility, consequently making the banking asset fairly vulnerable.