Economics at your fingertips  

Did Basel regulations cause a significant procyclicality?

Katsutoshi Shimizu and Kim Ly
Additional contact information
Katsutoshi Shimizu: Department of Economics, Nagoya University
Kim Ly: School of Management, Swansea University

No 2018-06, Working Papers from Swansea University, School of Management

Abstract: This paper examines the procyclical effect of risk-sensitive capital regulation on bank lending. We find evidence that the sensitivity of bank lending to the GDP is significantly positive under the internal rating-based approach. Our findings show that the risk-sensitive requirements of the Basel II and III regulations have procyclicale effects on bank lending in nine European countries. The introduction of the risk-sensitive capital requirement rule has a negative impact on lending in these countries. The policy implication is that regulators should place greater priority on building a buffer in advance, which can be used in times of stress rather than for dampening excess cyclicality.

Keywords: Bank capital; Basel regulation; macro-prudential policy; business cycle; procyclicality; buffer capital; countercyclical buffer. (search for similar items in EconPapers)
JEL-codes: G21 G28 G18 G14 G32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cba and nep-rmg
Date: 2018-02-01
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link) Second version, 2018 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this paper

More papers in Working Papers from Swansea University, School of Management Contact information at EDIRC.
Bibliographic data for series maintained by Greg John ().

Page updated 2018-11-29
Handle: RePEc:swn:wpaper:2018-06