Bank capital (requirements) and credit supply: Evidence from pillar 2 decisions

Olivier De Jonghe, Hans Dewachter and Steven Ongena

Journal of Corporate Finance, 2020, vol. 60, issue C

Abstract: We analyze how time-varying bank-specific capital requirements affect bank lending to the non-financial corporate sector as well as banks' balance sheet adjustments. To do so, we relate Pillar 2 capital requirements to a comprehensive corporate credit register coupled with bank and firm balance sheet data. Our analysis consists of three components. First, we investigate how capital requirements affect the supply of bank credit to the corporate sector, both on the intensive and extensive margin, as well as for different types of credit. Subsequently, we document how bank and firm characteristics as well as the monetary policy stance impact the relationship between bank capital requirements and the supply of credit. Finally, we examine how time-varying bank-specific capital requirements affect banks' balance sheet composition.

Keywords: Capital requirements; Credit supply; Credit register; Bank regulation (search for similar items in EconPapers)
JEL-codes: G01 G21 G28 L5 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (120)

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Working Paper: Bank capital (requirements) and credit supply: Evidence from pillar 2 decisions (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:60:y:2020:i:c:s0929119918307521

DOI: 10.1016/j.jcorpfin.2019.101518

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