Are capital buffers pro-cyclical? Evidence from Spanish panel data

Juan Ayuso (), Daniel Pérez () and Jesús Saurina ()
Additional contact information
Juan Ayuso: Banco de España
Daniel Pérez: Banco de España

No 224, Working Papers from Banco de España

Abstract: In this paper, we analyse the relationship between the Spanish business cycle and the capital buffers held by Spanish commercial and savings banks. We build an incomplete panel of Spanish institutions from 1986 to 2000 –thus covering a complete business cycle– and estimate an equation for the behaviour of capital buffers that includes an indicator of the business cycle. Our findings are fairly robust and quite unequivocal. After controlling for other potential determinants of the surplus capital we find a robustly significant negative relationship between the business cycle and capital buffers. From a quantitative standpoint, an increase of 1 percentage point in GDP growth might reduce capital buffers by 17%. This relationship is, moreover, asymmetric, being closer during upturns. Accordingly, there is a case for taking into account the so-called pro-cyclicality problem in the final design of Basel II. Pillar 2 seems to be the right place to address the issue.

Pages: 23 pages
Date: 2002-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (28)

Downloads: (external link)
http://www.bde.es/f/webbde/SES/Secciones/Publicaci ... o/02/Fic/dt0224e.pdf First version, October 2002 (application/pdf)

Related works:
Journal Article: Are capital buffers pro-cyclical?: Evidence from Spanish panel data (2004)
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:bde:wpaper:0224

Access Statistics for this paper

More papers in Working Papers from Banco de España Contact information at EDIRC.
Bibliographic data for series maintained by Ángel Rodríguez. Electronic Dissemination of Information Unit. Research Department. Banco de España ().