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How have banks adjusted to higher capital requirements?

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  • Benjamin Cohen

Abstract

Spurred by stronger regulatory requirements, banks have steadily increased their capital ratios since the financial crisis. For a sample of 82 large global banks from advanced and emerging economies, retained earnings accounted for the bulk of the increase in risk-weighted capital ratios over the period 2009-12, with reductions in risk weights playing a lesser role. On average, banks continued to expand their lending, though lending growth was slower among advanced economy banks from Europe. Lower dividend payouts and wider lending spreads contributed to banks' ability to use retained earnings to build capital. Banks that came out of the crisis with higher capital ratios and stronger profitability were able to expand lending more.

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Bibliographic Info

Article provided by Bank for International Settlements in its journal BIS Quarterly Review.

Volume (Year): (2013)
Issue (Month): (September)
Pages:

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Handle: RePEc:bis:bisqtr:1309e

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  1. Miles, David & Yang, Jing & Marcheggiano, Gilberto, 2011. "Optimal Bank Capital," Discussion Papers 31, Monetary Policy Committee Unit, Bank of England.
  2. Kapan, Tümer & Minoiu, Camelia, 2013. "Balance sheet strength and bank lending during the global financial crisis," Discussion Papers 33/2013, Deutsche Bundesbank, Research Centre.
  3. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  4. Patrick Slovik & Boris Cournède, 2011. "Macroeconomic Impact of Basel III," OECD Economics Department Working Papers 844, OECD Publishing.
  5. Anamaria Illes & Marco Jacopo Lombardi, 2013. "Interest rate pass-through since the financial crisis," BIS Quarterly Review, Bank for International Settlements, September.
  6. Stefan Afdjiev & Zsolt Kuti & Elod Takáts, 2012. "The euro area crisis and cross-border bank lending to emerging markets," BIS Quarterly Review, Bank for International Settlements, December.
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Cited by:
  1. Heinrich, Gregor, 2013. "El posible impacto de las reformas internacionales en América Latina y el Caribe
    [The possible impact of international reforms in Latin Americas and the Caribbean]
    ," MPRA Paper 51457, University Library of Munich, Germany.

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