A model of bank capital, lending and the macroeconomy: Basel I versus Basel II

Lea Zicchino ()

Bank of England working papers from Bank of England

Abstract: The revised framework for capital regulation of internationally active banks (known as Basel II) introduces risk-based capital requirements. This paper analyses the relationship between bank capital, lending and macroeconomic activity under the new capital adequacy regime. It extends a model of the bank-capital channel of monetary policy - developed by Chami and Cosimano - by introducing capital constraints . la Basel II. The results suggest that bank capital is likely to be less variable under the new capital adequacy regime than under the current one, which is characterised by invariant asset risk-weights. However, bank lending is likely to be more responsive to macroeconomic shocks.

Date: 2005-08
New Economics Papers: this item is included in nep-ban, nep-cba, nep-fmk, nep-mac, nep-mon and nep-reg
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Citations: View citations in EconPapers (20)

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Related works:
Journal Article: A MODEL OF BANK CAPITAL, LENDING AND THE MACROECONOMY: BASEL I VERSUS BASEL II* (2006)
Working Paper: A model of bank capital, lending and the macro economy: Basel I versus Basel II (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:270

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