Bank Efficiency, Risk‐Based Capital, and Real Estate Exposure: The Credit Crunch Revisited

William L. Weber and Michael Devaney

Real Estate Economics, 1999, vol. 27, issue 1, 1-25

Abstract: The turbulent real estate market during the early 1990s coincided with the implementation of risk‐based capital standards for commercial banks. In this study we use non‐parametric linear programming techniques to identify the lost real estate lending due to bank inefficiency. Inefficiency may arise from one of three sources: risk‐based capital standards which constrain bank real estate lending, inefficiency stemming from managerial oversight of real estate lending, and scale inefficiency which arises from banks not operating at constant returns to scale. The results indicate that the lost real estate lending associated with risk‐based capital standards averaged 2.7% of total bank assets. However, banks could compensate by exercising better managerial oversight of real estate lending and by operating at constant returns to scale.

Date: 1999
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://doi.org/10.1111/1540-6229.00764

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:reesec:v:27:y:1999:i:1:p:1-25

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1080-8620

Access Statistics for this article

Real Estate Economics is currently edited by Crocker Liu, N. Edward Coulson and Walter Torous

More articles in Real Estate Economics from American Real Estate and Urban Economics Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().