Do better capitalized banks lend less? Long-run panel evidence from Germany

Claudia Buch and Esteban Prieto ()

No 37, University of Tübingen Working Papers in Business and Economics from University of Tuebingen, Faculty of Economics and Social Sciences, School of Business and Economics

Abstract: Insufficient capital buffers of banks have been identified as one main cause for the large systemic effects of the recent financial crisis. Although higher capital is no panacea, it yet features prominently in proposals for regulatory reform. But how do increased capital requirements affect business loans? While there is widespread belief that the real costs of increased bank capital in terms of reduced loans could be substantial, there are good reasons to believe that the negative real sector implications need not be severe. In this paper, we take a long-run perspective by analyzing the link between the capitalization of the banking sector and bank loans using panel cointegration models. We study the evolution of the German economy for the past 60 years. We find no evidence for a negative impact of bank capital on business loans.

Keywords: Bank capital; Business loans; Cointegration (search for similar items in EconPapers)
JEL-codes: C33 E5 G2 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-ban and nep-cba
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Journal Article: Do Better Capitalized Banks Lend Less? Long-Run Panel Evidence from Germany (2014)
Working Paper: Do Better Capitalized Banks Lend Less? Long-Run Panel Evidence from Germany (2012)
Working Paper: Do Better Capitalized Banks Lend Less? Long-Run Panel Evidence from Germany (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:tuewef:37

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