Bank Lending Constraints in the Euro Area

Daniel P. Monteiro and Romanos Priftis

No 43, European Economy - Discussion Papers from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission

Abstract: This paper constructs stylized scenarios to assess the lending constraints faced by the banking sectors of euro area Member States arising from a combination of low profitability, adverse bank equity markets and the phase in of new capital requirements. In this connection, it also presents a comprehensive review of the potential sources of increases in minimum bank capital requirements, providing projections for their evolution at Member State level. The combination of the aforementioned factors is seen to carry the potential to significantly constrain bank lending over the period of transition to higher capital ratios which, according to DSGE model simulations, can noticeably impair growth and investment levels in the short run.

JEL-codes: E22 E27 G21 G28 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2017-02
New Economics Papers: this item is included in nep-dge, nep-eec and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:euf:dispap:043

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