Economics at your fingertips  

Liquidity creation cyclicality, capital regulation and interbank credit: Evidence from Chinese commercial banks

Ying Tang, Zhiyong Li, Jing Chen and Chao Deng

Pacific-Basin Finance Journal, 2021, vol. 67, issue C

Abstract: The cyclicality of the banking industry is closely related to financial crisis. Based on the methodology of Berger and Bouwman (2009) to measure bank liquidity creation, this paper investigates whether liquidity creation is cyclical for Chinese banks during 2012–2018. Our results indicate that liquidity creation by Chinese banks is procyclical and this procyclicality is more pronounced among regional banks. And we further explore the influence of capital regulatory pressure and interbank credit on the procyclicality of Chinese bank liquidity creation. We find that capital regulatory pressure and interbank credit are helpful in mitigating the procyclicality of bank liquidity creation, especially among regional banks. As the Chinese banking industry takes a great proportion of the global banking industry, our findings provide various implications on capital regulation and interbank business supervision for national and international bank regulators and policymakers.

Keywords: Liquidity creation; Cyclicality; Capital regulation; Interbank credit; Capital buffer (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

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:

DOI: 10.1016/j.pacfin.2021.101523

Access Statistics for this article

Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee

More articles in Pacific-Basin Finance Journal from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

Page updated 2021-07-31
Handle: RePEc:eee:pacfin:v:67:y:2021:i:c:s0927538x21000305