Assessing the Cyclical Behaviour of Bank Capital Buyers in a Finance-Augmented Macro-Economy

Alberto Montagnoli (), Kostas Mouratidis and Kemar Whyte

No 2018003, Working Papers from The University of Sheffield, Department of Economics

Abstract: This paper empirically analyses how the capital buffer held by banks behave over the business cycle after financial factors have been accounted for. Using a large panel of banks for the period 2000-2014, we document evidence that capital buffers behave more pro-cyclical than previously found in the literature. Furthermore, we also show that this relationship is more pronounced for large commercial banks where access to capital equity markets and external support (bail-out) is likely to constitute a strong incentive to increase credit exposure and lower capital reserves accordingly. Overall, these results have important implications for the development of macroprudential policy tools for the global financial system.

Keywords: Pro-cyclicality; Capital Buyers; Business Cycle; Financial Cycle; Macropru-dential Policy (search for similar items in EconPapers)
JEL-codes: E32 G21 G28 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2018-03
New Economics Papers: this item is included in nep-ban and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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http://www.sheffield.ac.uk/economics/research/serps/articles/2018003 First version, April 2018 (application/pdf)

Related works:
Journal Article: Assessing the cyclical behaviour of bank capital buffers in a finance-augmented macro-economy (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:shf:wpaper:2018003

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