Bank Capital Redux: Solvency, Liquidity, and Crisis

Alan Taylor, Oscar Jorda, Richter, Björn and Moritz Schularick

No 11934, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: What is the relationship between bank capital, the risk of a financial crisis, and its severity? This paper introduces the first comprehensive analysis of the long-run evolution of the capital structure of modern banking using newly constructed data for banks’ balance sheets in 17 countries since 1870. In addition to establishing stylized facts on the changing funding mix of banks, we study the nexus between capital structure and financial instability. We find no association between higher capital and lower risk of banking crisis. However, economies with better capitalized banking systems recover faster from financial crises as credit begins to flow back more readily.

Keywords: Financial crises; Risk taking; Crisis prediction; Local projections; Bank liabilities; Capital ratio; Macroprudential regulation (search for similar items in EconPapers)
JEL-codes: E44 G01 G21 N20 (search for similar items in EconPapers)
Date: 2017-03
New Economics Papers: this item is included in nep-ban, nep-cba, nep-his and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (45)

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Related works:
Journal Article: Bank Capital Redux: Solvency, Liquidity, and Crisis (2021)
Working Paper: Bank Capital Redux: Solvency, Liquidity, and Crisis (2021)
Working Paper: Bank Capital Redux: Solvency, Liquidity, and Crisis (2021)
Working Paper: Bank Capital Redux: Solvency, Liquidity, and Crisis (2017)
Working Paper: Bank Capital Redux: Solvency, Liquidity, and Crisis (2017)
Working Paper: Bank Capital Redux: Solvency, Liquidity, and Crisis (2017)
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