Time-Varying Capital Requirements and Disclosure Rules: Effects on Capitalization and Lending Decisions

Björn Imbierowicz, Jonas Kragh, Jesper Rangvid

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

We investigate how banks' capital and lending decisions respond to changes in bank-specific capital and disclosure requirements. We find that an increase in the bank-specific regulatory capital requirement results in a higher bank capital ratio, brought about via less asset risk. A decrease in the requirement implies more lending to firms but also less Tier 1 capital and higher bank leverage. We do not observe differences between confidential and public disclosure of capital requirements. Our results empirically illustrate a trade-off between bank resilience and a fostering of the economy through more bank lending using banks' capital requirement as policy instrument.
We investigate how banks' capital and lending decisions respond to changes in bank-specific capital and disclosure requirements. We find that an increase in the bank-specific regulatory capital requirement results in a higher bank capital ratio, brought about via less asset risk. A decrease in the requirement implies more lending to firms but also less Tier 1 capital and higher bank leverage. We do not observe differences between confidential and public disclosure of capital requirements. Our results empirically illustrate a trade-off between bank resilience and a fostering of the economy through more bank lending using banks' capital requirement as policy instrument.
LanguageEnglish
JournalJournal of Money, Credit and Banking
Volume50
Issue number4
Pages573-602
Number of pages30
ISSN0022-2879
DOIs
StatePublished - Jun 2018

Keywords

  • Bank capital structure
  • Bank lending
  • Capital disclosure rules
  • Capital requirement

Cite this

@article{be8f6d1aad664953b1a9345b98334152,
title = "Time-Varying Capital Requirements and Disclosure Rules: Effects on Capitalization and Lending Decisions",
abstract = "We investigate how banks' capital and lending decisions respond to changes in bank-specific capital and disclosure requirements. We find that an increase in the bank-specific regulatory capital requirement results in a higher bank capital ratio, brought about via less asset risk. A decrease in the requirement implies more lending to firms but also less Tier 1 capital and higher bank leverage. We do not observe differences between confidential and public disclosure of capital requirements. Our results empirically illustrate a trade-off between bank resilience and a fostering of the economy through more bank lending using banks' capital requirement as policy instrument.",
keywords = "Bank capital structure, Bank lending, Capital disclosure rules, Capital requirement, Bank capital structure , Bank lending, Capital disclosure rules, Capital requirement",
author = "Bj{\"o}rn Imbierowicz and Jonas Kragh and Jesper Rangvid",
year = "2018",
month = "6",
doi = "10.1111/jmcb.12506",
language = "English",
volume = "50",
pages = "573--602",
journal = "Journal of Money, Credit and Banking",
issn = "0022-2879",
publisher = "Wiley",
number = "4",

}

Time-Varying Capital Requirements and Disclosure Rules : Effects on Capitalization and Lending Decisions. / Imbierowicz, Björn; Kragh, Jonas; Rangvid, Jesper.

In: Journal of Money, Credit and Banking, Vol. 50, No. 4, 06.2018, p. 573-602.

Research output: Contribution to journalJournal articleResearchpeer-review

TY - JOUR

T1 - Time-Varying Capital Requirements and Disclosure Rules

T2 - Journal of Money, Credit and Banking

AU - Imbierowicz,Björn

AU - Kragh,Jonas

AU - Rangvid,Jesper

PY - 2018/6

Y1 - 2018/6

N2 - We investigate how banks' capital and lending decisions respond to changes in bank-specific capital and disclosure requirements. We find that an increase in the bank-specific regulatory capital requirement results in a higher bank capital ratio, brought about via less asset risk. A decrease in the requirement implies more lending to firms but also less Tier 1 capital and higher bank leverage. We do not observe differences between confidential and public disclosure of capital requirements. Our results empirically illustrate a trade-off between bank resilience and a fostering of the economy through more bank lending using banks' capital requirement as policy instrument.

AB - We investigate how banks' capital and lending decisions respond to changes in bank-specific capital and disclosure requirements. We find that an increase in the bank-specific regulatory capital requirement results in a higher bank capital ratio, brought about via less asset risk. A decrease in the requirement implies more lending to firms but also less Tier 1 capital and higher bank leverage. We do not observe differences between confidential and public disclosure of capital requirements. Our results empirically illustrate a trade-off between bank resilience and a fostering of the economy through more bank lending using banks' capital requirement as policy instrument.

KW - Bank capital structure

KW - Bank lending

KW - Capital disclosure rules

KW - Capital requirement

KW - Bank capital structure

KW - Bank lending

KW - Capital disclosure rules

KW - Capital requirement

U2 - 10.1111/jmcb.12506

DO - 10.1111/jmcb.12506

M3 - Journal article

VL - 50

SP - 573

EP - 602

JO - Journal of Money, Credit and Banking

JF - Journal of Money, Credit and Banking

SN - 0022-2879

IS - 4

ER -