EconPapers    
Economics at your fingertips  
 

Implications of bank regulation for loan supply and bank stability: a dynamic perspective

Monika Bucher, Diemo Dietrich and Achim Hauck

The European Journal of Finance, 2019, vol. 25, issue 16, 1527-1550

Abstract: We show that internal funds play a particular role in the regulation of bank capital, which has not received much attention, yet. A bank's decision on loan supply and capital structure determines its immediate bankruptcy risk as well as the future availability of internal funds. These internal funds in turn determine a bank's future costs of external finance and its future vulnerability to bankruptcy risks. Using a partial equilibrium model, we study how internal funds affect these intra- and intertemporal links. Moreover, our positive analysis identifies the effects of risk-weighted capital-to-asset ratios, liquidity coverage ratios and regulatory margin calls on the dynamics of internal funds and thus loan supply and bank stability. Only regulatory margin calls or large liquidity coverage ratios achieve bank stability for all risk levels, but for large risks a bank will stop credit intermediation.

Date: 2019
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://hdl.handle.net/10.1080/1351847X.2019.1614084 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Implications of bank regulation for loan supply and bank stability: A dynamic perspective (2018) Downloads
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:taf:eurjfi:v:25:y:2019:i:16:p:1527-1550

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/REJF20

DOI: 10.1080/1351847X.2019.1614084

Access Statistics for this article

The European Journal of Finance is currently edited by Chris Adcock

More articles in The European Journal of Finance from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().

 
Page updated 2021-06-07
Handle: RePEc:taf:eurjfi:v:25:y:2019:i:16:p:1527-1550