Can better capitalised banks be more profitable? An analysis of large French banking groups before and after the financial crisis

Des banques mieux capitalisées peuvent‑elles être plus profitables ? Analyse des grands groupes bancaires français avant et après la crise financière

Olivier de Bandt (), Boubacar Camara (), Pierre Pessarossi () and Martin Rose ()
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Olivier de Bandt: ACPR - Autorité de Contrôle Prudentiel et de Résolution - Autorité de Contrôle Prudentiel et de Résolution, Banque de France
Boubacar Camara: ACPR - Autorité de Contrôle Prudentiel et de Résolution - Autorité de Contrôle Prudentiel et de Résolution, Banque de France
Pierre Pessarossi: ACPR - Autorité de Contrôle Prudentiel et de Résolution - Autorité de Contrôle Prudentiel et de Résolution, Banque de France
Martin Rose: Centre de recherche de la Banque Centrale européenne - Banque Centrale Européenne

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Abstract: The article studies the effect of French banks' capitalisation on their profitability. It contributes to the debate which has emerged, following the financial crisis, on the impact of the tightening of the regulation of capital (Basel III). Our econometric results show that over the period of 1993-2012, beyond the general trend of profitability which is weaker after the crisis, banks which increase their capital ratio more than the average improve their profitability, wit- hout it being possible to distinguish between voluntary increases and those imposed by regu- lation. All else being equal, a 100-basis point increase of the different capitalisation measures leads to a 3 to 10% increase in the average return on equity (ROE), depending on the measures considered, and to a 7 to 30% increase in the average return on assets (ROA). The positive impact of an increase of capitalisation on ROA is less significant when it is done by issuing shares.

Keywords: solvency ratios; Basel III; banking regulation; capital; ROA; ROE; Bâle III; réglementation bancaire; ratios de solvabilité (search for similar items in EconPapers)
Date: 2017-10-11
Note: View the original document on HAL open archive server: https://insee.hal.science/hal-05501081v1
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Published in Economie et Statistique / Economics and Statistics, 2017, 494-495-496, pp.131-148. ⟨10.24187/ecostat.2017.494t.1922⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05501081

DOI: 10.24187/ecostat.2017.494t.1922

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