Capital ratios and banking crises in the European Union

Raphaël Cardot-Martin, Fabien Labondance and Catherine Refait-Alexandre

International Economics, 2022, issue 172, 389-402

Abstract: We assess if capital ratios reduced the occurrence of banking crises in the European Union from 1998 to 2017. We use a Probit model and estimate the effect of two measures: the bank capital to total assets ratio and the bank regulatory capital to Risk Weighted Assets (RWA). We found that both measures affect negatively the probability of crisis. This result is robust to the exclusion of outliers, to the inclusion of various control variables for banking, financial and macroeconomic risks. Finally, we show that while the bank regulatory capital to RWA has always a negative effect on the probability of crisis, the bank capital to total assets ratio is only significant above a threshold, estimated between 10 ?% and 12 ?%.

Keywords: Banking regulation; Leverage ratio; Risk-weighted capital requirement; Banking crisis (search for similar items in EconPapers)
JEL-codes: E44 G21 (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.sciencedirect.com/science/article/pii/S2110701721000494 (text/html)

Related works:
Journal Article: Capital ratios and banking crises in the European Union (2022)
Working Paper: Capital ratios and banking crises in the European Union (2021)
Working Paper: Capital ratios and banking crises in the European Union (2021)
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:cii:cepiie:2022-q3-172-29

Access Statistics for this article

More articles in International Economics from CEPII research center Contact information at EDIRC.
Bibliographic data for series maintained by ().