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Implications of bank regulation for loan supply and bank stability: A dynamic perspective

Monika Bucher (), Diemo Dietrich and Achim Hauck

No 43/2018, Discussion Papers from Deutsche Bundesbank

Abstract: A bank's decision on loan supply and capital structure determines its immediate bankruptcy risk as well as the future availability of internal funds. These internal funds in turn determine a bank's future costs of external finance and future vulnerability to bankruptcy risks. We study these intra- and intertemporal links and analyze the influence of risk-weighted capital-to-asset ratios, liquidity coverage ratios and regulatory margin calls on the dynamics of loan supply and bank stability. Only regulatory margin calls or large liquidity coverage ratios achieve bank stability for all risk levels, but for large risks a bank will stop credit intermediation.

Keywords: bank lending; banking crisis; bank capital regulation; liquidity regulation (search for similar items in EconPapers)
JEL-codes: G01 G21 G28 E32 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac and nep-rmg
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Related works:
Journal Article: Implications of bank regulation for loan supply and bank stability: a dynamic perspective (2019) Downloads
Working Paper: Implications of Bank Regulation for Credit Intermediation and Bank Stability: A Dynamic Perspective (2013) Downloads
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