Two-way interplays between capital buffers and credit growth: Evidence from French banks

Jerome Coffinet, Virginie Coudert (), Adrian Pop () and Cyril Pouvelle
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Virginie Coudert: EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique
Adrian Pop: LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - IEMN-IAE Nantes - Institut d'Économie et de Management de Nantes - Institut d'Administration des Entreprises - Nantes - UN - Université de Nantes

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Abstract: We assess the extent to which bank capital buffers exacerbate the cyclical behavior of credit. We empirically study the relationships between GDP growth, capital buffers and loan growth with firm-level data for French banks over the period 1993–2009. Based on panel data simultaneous equations and Granger causality tests, our findings point to mutually reinforcing mechanisms between capital buffers and loan growth, all the more as better quality capital is considered. Overall, those empirical results lend support to a countercyclical financial regulation focused on high-quality capital and loan growth smoothing.

Keywords: Basel III; Bank capital regulation; Pro-cyclicality; Capital buffers; Business cycle (search for similar items in EconPapers)
Date: 2012-12
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01511102v1
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Citations: View citations in EconPapers (13)

Published in Journal of International Financial Markets, Institutions and Money, 2012, 22 (5), pp.1110-1125. ⟨10.1016/j.intfin.2012.05.011⟩

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Journal Article: Two-way interplays between capital buffers and credit growth: Evidence from French banks (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-01511102

DOI: 10.1016/j.intfin.2012.05.011

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