Bank capital buffers around the world: Cyclical patterns and the effect of market power

Oscar Carvallo () and Alberto Ortiz ()

MPRA Paper from University Library of Munich, Germany

Abstract: We examine the effect of competition and business cycles on bank capital buffers around the world. We use a dataset of 3,461 banks from 25 developed and 54 developing countries over the 2001-2013 period. Banks tend on average to exhibit pro-cyclical behavior. But capital buffers seem to be more pro-cyclical in developing countries. Our results show that more competition leads to higher buffers in developed countries but to lower buffers in developing ones. This evidence suggests that the “competition-stability” thesis adheres in developed economies, whereas “competition-fragility” makes more sense in developing countries. This asymmetric result may have important policy implications, particularly with regard to new, globally-negotiated capital adequacy standards.

Keywords: Bank capital buffers; Business cycle; Regulation; Market power (search for similar items in EconPapers)
JEL-codes: G21 L1 L5 (search for similar items in EconPapers)
Date: 2018-02-18
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Citations: View citations in EconPapers (7)

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Journal Article: Bank capital buffers around the world: Cyclical patterns and the effect of market power (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:84617

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