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Basel III and Bank-Lending: Evidence from the United States and Europe

Sami Ben Naceur, Jérémy Pépy and Caroline Roulet

No 2017/245, IMF Working Papers from International Monetary Fund

Abstract: Using data on commercial banks in the United States and Europe, this paper analyses the impact of the new Basel III capital and liquidity regulation on bank-lending following the 2008 financial crisis. We find that U.S. banks reinforce their risk absorption capacities when expanding their credit activities. Capital ratios have significant, negative impacts on bank-retail-and-other-lending-growth for large European banks in the context of deleveraging and the “credit crunch” in Europe over the post-2008 financial crisis period. Additionally, liquidity indicators have positive but perverse effects on bank-lending-growth, which supports the need to consider heterogeneous banks’ characteristics and behaviors when implementing new regulatory policies.

Keywords: WP; financial crisis; leverage ratio; U.S. bank; credit crunch; European bank; lending supply; bank regulatory capital; liquidity requirements; banking regulation; bank risk appetite; introduced bank capital regulation; determinants of bank-lending; Loans; Capital adequacy requirements; Basel III; Liquidity management; Credit; Europe; Global (search for similar items in EconPapers)
Pages: 50
Date: 2017-11-15
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