 Liquidity regulation and bank lendingFoly Ananou, Dimitris Chronopoulos, Amine Tarazi and John O.S. Wilson Post-Print from HAL Abstract: Bank liquidity shortages during the global financial crisis of 2007–2009 led to the introduction of liquidity regulations, the impact of which has attracted the attention of academics and policymakers. In this paper, we investigate the impact of liquidity regulation on bank lending. As a setting, we use the Netherlands, where a Liquidity Balance Rule (LBR) was introduced in 2003. The LBR was imposed on Dutch banks only and did not apply to other banks operating elsewhere within the Eurozone. Using this differential regulatory treatment to overcome identification concerns and a difference-in-differences approach, we find that the LBR increased the volume of lending by Dutch banks relative to other banks located in the Eurozone. Increased equity, an inflow of retail deposits and subsequent increase in balance sheet size allowed Dutch banks to increase lending despite having to meet the LBR requirements. The LBR also affected the loan composition of Dutch banks (with corporate and retail lending increasing more than mortgage lending) and the maturity profile of loan portfolios. Our results have relevance for policymakers tasked with monitoring the impact of liquidity regulations on banks and the real economy. Date: 2021-08 Published in Journal of Corporate Finance, 2021, 69, pp.101997. ⟨10.1016/j.jcorpfin.2021.101997⟩ There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04881054 DOI: 10.1016/j.jcorpfin.2021.101997 Access Statistics for this paper More papers in Post-Print from HAL |
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