Banks' regulatory capital buffer and the business cycle: Evidence for Germany

Stephanie Stolz and Michael Wedow

Journal of Financial Stability, 2011, vol. 7, issue 2, 98-110

Abstract: This paper analyzes the effect of the business cycle on the regulatory capital buffers of German local banks in the period 1993-2004. The capital buffers are found to fluctuate countercyclically over the business cycle. The evidence supports that low-capitalized banks do not catch up with their well-capitalized peers over the observation period and they do not decrease risk-weighted assets during a recession. This finding suggests that their low capitalization does not force them to retreat from lending.

Keywords: Capital; regulation; Bank; capital; Business; cycle; fluctuations (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (106)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:7:y:2011:i:2:p:98-110

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