How do European banks cope with macroprudential capital requirements

Sergio Mayordomo and Maria Rodriguez-Moreno

Finance Research Letters, 2021, vol. 38, issue C

Abstract: This paper studies the effect of macroprudential requirements on capital ratios for a sample of euro area banks. We first document that banks’ capital ratios are typically above minimum regulatory levels. The banks in our sample differ in their degree of systemic importance and once we split the banks according to this criterion, we find that non-systemically important banks build up capital buffers to a higher extent than systemic banks and in excess of minimum requirements. The main channel through which these banks enhance their capital ratios is the optimization of risk-weighted assets, particularly by rebalancing portfolios towards safer assets.

Keywords: European banks; Macroprudential requirements; Capital ratios; Risk weighted assets (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:38:y:2021:i:c:s1544612319310220

DOI: 10.1016/j.frl.2020.101459

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