The impact of changes in bank capital requirements

Akash Raja ()
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Akash Raja: Bank of England, Postal: Bank of England, Threadneedle Street, London, EC2R 8AH

No 1004, Bank of England working papers from Bank of England

Abstract: This paper studies how banks respond to capital regulation using confidential data on bank‑specific requirements in the UK. Banks do adjust their capital ratios following changes in requirements, though the pass-through is incomplete. While they lower capital ratios following a loosening of requirements, they eat into their existing capital buffers when facing tighter regulatory minima. I find that the main adjustment channels have changed since the financial crisis. Prior to the crisis, banks responded to changes in their requirements through capital accumulation and loan quantities; however, they have since then primarily altered the risk composition of assets.

Keywords: Capital requirements; microprudential policy; banking; capital ratios (search for similar items in EconPapers)
JEL-codes: E58 G21 G28 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2023-01-23
New Economics Papers: this item is included in nep-ban, nep-cba and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:1004

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