Banks' regulatory capital buffer and the business cycle: Evidence for Germany
AbstractThis paper analyzes the effect of the business cycle on the regulatory capital buffers of German local banks in the period 1993-2004. The capital buffers are found to fluctuate countercyclically over the business cycle. The evidence supports that low-capitalized banks do not catch up with their well-capitalized peers over the observation period and they do not decrease risk-weighted assets during a recession. This finding suggests that their low capitalization does not force them to retreat from lending.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Financial Stability.
Volume (Year): 7 (2011)
Issue (Month): 2 (June)
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Capital regulation Bank capital Business cycle fluctuations;
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