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Does banks' systemic importance affect their capital structure and balance sheet adjustment processes?

Yassine Bakkar (), Olivier De Jonghe () and Amine Tarazi
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Yassine Bakkar: LAPE - Laboratoire d'Analyse et de Prospective Economique - IR SHS UNILIM - Institut Sciences de l'Homme et de la Société - UNILIM - Université de Limoges
Olivier De Jonghe: European Banking Center, Tilburg University and National Bank of Belgium. - Tilburg University and National Bank of Belgium

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Abstract: Frictions prevent banks to immediately adjust their capital ratio towards their desired and/or imposed level. This paper analyzes (i) whether or not these frictions are larger for regulatory capital ratios vis-à-vis a plain leverage ratio; (ii) which adjustment channels banks use to adjust their capital ratio; and (iii) how the speed of adjustment and adjustment channels differ between large, systemic and complex banks versus small banks. Our results, obtained using a sample of listed banks across OECD countries for the 2001-2012 period, bear critical policy implications for the implementation of new (systemic risk-based) capital requirements and their impact on banks' balance sheets, specifically lending, and hence the real economy.

Keywords: capital structure; speed of adjustment; systemic risk; systemic size; bank regulation; lending; balance sheet composition (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban
Date: 2017-11-16
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