Does capital-based regulation affect bank pricing policy?

Dominika Ehrenbergerová (), Martin Hodula and Zuzana Gric
Additional contact information
Dominika Ehrenbergerová: Czech National Bank and Charles University
Authors registered in the RePEc Author Service: Dominika Kolcunová

Journal of Regulatory Economics, 2022, vol. 61, issue 2, No 3, 135-167

Abstract: Abstract This paper tests whether a series of changes to capital requirements transmitted to a change to banks’ pricing policy. We compile a rich bank-level supervisory dataset covering the banking sector in the Czech Republic over the period 2004–2019. We estimate that the changes to the overall capital requirements did not force banks to alter their pricing policy. The impact on bank interest margins and loan rates is found to lie in a narrow range around zero irrespective of loan category. Our estimates allow us to rule out effects even for less-capitalised banks and small banks. The results obtained contradict estimates from other studies reporting significant transmission of capital regulation to lending rates and interest margins. We therefore engage in a deeper discussion of why this might be the case. Our estimates may be used in the ongoing discussion of the benefits and costs of capital-based regulation in banking.

Keywords: Bank pricing policy; Capital requirements; Interest margins; Loan rates; E58; G21; G28 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://link.springer.com/10.1007/s11149-022-09448-5 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Does Capital-Based Regulation Affect Bank Pricing Policy? (2020)
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:kap:regeco:v:61:y:2022:i:2:d:10.1007_s11149-022-09448-5

Ordering information: This journal article can be ordered from
http://www.springer. ... on/journal/11149/PS2

DOI: 10.1007/s11149-022-09448-5

Access Statistics for this article

Journal of Regulatory Economics is currently edited by Menaham Spiegel

More articles in Journal of Regulatory Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().