How Do Capital Requirements Affect Loan Rates? Evidence from High Volatility Commercial Real Estate*

David Glancy and Robert Kurtzman

The Review of Corporate Finance Studies, 2022, vol. 11, issue 1, 88-127

Abstract: We investigate how capital requirements affect loan rates by studying the 50% increase in the risk weight for high volatility commercial real estate (HVCRE) loans under Basel III. Exploiting variation in loan terms and exposure to the period after the rule’s implementation, we find that a one-percentage-point increase in capital requirements raises loan rates by 8.5 basis points. Using a model of bank funding costs, we demonstrate the timing and scope of the HVCRE rule implies our estimate reflects the steady-state cost of capital requirements. (JEL G21, G28, G38)

Date: 2022
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://hdl.handle.net/10.1093/rcfs/cfab013 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: How do Capital Requirements Affect Loan Rates? Evidence from High Volatility Commercial Real Estate (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:oup:rcorpf:v:11:y:2022:i:1:p:88-127.

Access Statistics for this article

The Review of Corporate Finance Studies is currently edited by Andrew Ellul

More articles in The Review of Corporate Finance Studies from Society for Financial Studies
Bibliographic data for series maintained by Oxford University Press ().