Real effects of bank capital regulations: Global evidence

Yota Deli (yota.deli@gmail.com) and Iftekhar Hasan

MPRA Paper from University Library of Munich, Germany

Abstract: We examine the effect of the full set of bank capital regulations (capital stringency) on loan growth, using bank-level data for a maximum of 125 countries over the period 1998-2011. Contrary to standard theoretical considerations, we find that overall capital stringency only has a weak negative effect on loan growth. In fact, this effect is completely offset if banks hold moderately high levels of capital. Interestingly, the components of capital stringency that have the strongest negative effect on loan growth are those related to the prevention of banks to use as capital borrowed funds and assets other than cash or government securities. In contrast, compliance with Basel guidelines in using Basel- and credit-risk weights has a much less potent effect on loan growth.

Keywords: capital regulation; loan growth; bank capital (search for similar items in EconPapers)
JEL-codes: E60 G0 G2 O40 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac and nep-rmg
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Citations: View citations in EconPapers (39)

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Related works:
Journal Article: Real effects of bank capital regulations: Global evidence (2017)
Working Paper: Real effects of bank capital regulations: Global evidence (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:79065

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