The Effects of Bank Capital on Lending: What Do We Know, and What Does It Mean?
AbstractCapital requirements are the principal tool of macroprudential regulation of banks. Bank capital serves both as a buffer and as a disincentive to excessive risk taking. When general equilibrium effects are taken into account, however, it is not clear that higher capital requirements will reduce the level of risk in the banking system. In addition, an increase in the required capital ratio can force banks to take on more risk in order to achieve target rates of return.
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Bibliographic InfoArticle provided by International Journal of Central Banking in its journal International Journal of Central Banking.
Volume (Year): 6 (2010)
Issue (Month): 34 (December)
Find related papers by JEL classification:
- G01 - Financial Economics - - General - - - Financial Crises
- 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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