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Bank-specific capital requirements and capital management from 1989-2013: Further evidence from the UK

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  • de-Ramon, Sebastian J.A.
  • Francis, William B.
  • Harris, Qun

Abstract

We examine how bank-specific capital requirements affect banks’ capital ratios and balance sheet composition over the period 1989-2013. We find that higher requirements, even when not binding in a regulatory sense, result in higher bank capital ratios, achieved by a combination of asset contraction, risk reduction and capital raising strategies. We find that after the 2007-09 financial crisis, banks place greater emphasis on raising capital, but that they continue to focus first on raising lower-quality capital. Our results have implications for evaluating the efficacy of bank-specific capital requirements as a policy tool to influence bank balance sheet behavior and resilience.

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  • de-Ramon, Sebastian J.A. & Francis, William B. & Harris, Qun, 2022. "Bank-specific capital requirements and capital management from 1989-2013: Further evidence from the UK," Journal of Banking & Finance, Elsevier, vol. 138(C).
    • Handle: RePEc:eee:jbfina:v:138:y:2022:i:c:s0378426621001485
    DOI: 10.1016/j.jbankfin.2021.106189
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    Cited by:

    1. Berrospide, Jose M., 2022. "IFABS 2017: Towards an Integrated View of Financial Regulation: Key Lessons from the Crisis and Future Challenges," Journal of Banking & Finance, Elsevier, vol. 138(C).

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    More about this item

    Keywords

    Banking; Regulatory capital requirements; Bank capital ratios; Pillar 2 requirements;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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