Empirical Evidence on the Effectiveness of Capital Buffer Release

Vasja Sivec and Matjaž Volk
Additional contact information
Vasja Sivec: STATEC/ANEC

International Journal of Central Banking, 2023, vol. 19, issue 3, 139-173

Abstract: With the new regulatory framework, known as Basel III, policymakers introduced a countercyclical capital buffer. Due to its recent introduction, empirical research on its effects is limited. We analyze a unique policy experiment to evaluate the effects of buffer release. In 2006, the Slovenian central bank introduced a temporary deduction item in the capital calculation, creating an average capital buffer of 0.8 percent of risk-weighted assets. It was released at the start of the financial crisis in 2008 and is akin to a release of a countercyclical capital buffer. We estimate its impact on bank behavior. After its release, firms borrowing from banks holding 1 pp higher capital buffer received 11 pp more in credit. Also, we find the impact was greater for healthy firms, and it increased loan loss provisioning for firms in default.

JEL-codes: G01 G21 G28 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.ijcb.org/journal/ijcb23q3a4.pdf (application/pdf)

Related works:
Working Paper: Empirical Evidence on the Effectiveness of Capital Buffer Release (2018)
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:ijc:ijcjou:y:2023:q:3:a:4

Access Statistics for this article

International Journal of Central Banking is currently edited by Loretta J. Mester

More articles in International Journal of Central Banking from International Journal of Central Banking
Bibliographic data for series maintained by Bank for International Settlements (webmaster@bis.org).