Time‐Varying Capital Requirements and Disclosure Rules: Effects on Capitalization and Lending Decisions

Bjorn Imbierowicz, Jonas Kragh and Jesper Rangvid

Journal of Money, Credit and Banking, 2018, vol. 50, issue 4, 573-602

Abstract: We investigate how banks’ capital and lending decisions respond to changes in bank‐specific capital and disclosure requirements. We find that an increase in the bank‐specific regulatory capital requirement results in a higher bank capital ratio, brought about via less asset risk. A decrease in the requirement implies more lending to firms but also less Tier 1 capital and higher bank leverage. We do not observe differences between confidential and public disclosure of capital requirements. Our results empirically illustrate a tradeoff between bank resilience and a fostering of the economy through more bank lending using banks’ capital requirement as policy instrument.

Date: 2018
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https://doi.org/10.1111/jmcb.12506

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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:50:y:2018:i:4:p:573-602

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