Advanced Search
MyIDEAS: Login to save this article or follow this journal

Banks' Equity Capital Frictions, Capital Ratios, and Interest Rates: Evidence from Spanish Banks

Contents:

Author Info

  • Alfredo Martin-Oliver

    (Universitat de les Illes Balears)

  • Sonia Ruano

    (Banco de Espana)

  • Vicente Salas-Fumas

    (Universidad de Zaragoza)

Abstract

Banks’ choices on their economic capital factor into the cost of funds and are key to the assessment of the social cost from higher equity capital ratios set by Basel III. We model the determinants of equity capital and the influence of its ratios on the interest rates of bank loans by using data from Spanish banks. The results show that a combination of valuemaximization choices and inertial earnings retentions determine equity capital and that the inertia component is more important to savings banks than to commercial banks. We also find that loans’ interest rates increase with equity capital and the increase is higher during the adjustment period than in the steady state.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.ijcb.org/journal/ijcb13q1a8.pdf
Download Restriction: no

File URL: http://www.ijcb.org/journal/ijcb13q1a8.htm
Download Restriction: no

Bibliographic Info

Article provided by International Journal of Central Banking in its journal International Journal of Central Banking.

Volume (Year): 9 (2013)
Issue (Month): 1 (March)
Pages: 183-225

as in new window
Handle: RePEc:ijc:ijcjou:y:2013:q:1:a:8

Contact details of provider:
Web page: http://www.ijcb.org/

Related research

Keywords:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Ignacio Hernando & Ernesto Villanueva, 2012. "The recent slowdown of bank lending in Spain: are supply-side factors relevant?," Banco de Espa�a Working Papers 1206, Banco de Espa�a.
  2. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
  3. Miles, David & Yang, Jing & Marcheggiano, Gilberto, 2011. "Optimal Bank Capital," Discussion Papers 31, Monetary Policy Committee Unit, Bank of England.
  4. Anat R. Admati & Peter M. DeMarzo & Martin F. Hellwig & Paul Pfleiderer, 2010. "Fallacies, Irrelevant Facts, and Myths in the Discussion of Capital Regulation: Why Bank Equity is Not Expensive," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2010_42, Max Planck Institute for Research on Collective Goods.
  5. Holmström, Bengt & Tirole, Jean, 1994. "Financial Intermediation, Loanable Funds and the Real Sector," IDEI Working Papers 40, Institut d'Économie Industrielle (IDEI), Toulouse.
  6. Shekhar Aiyar & Charles W. Calomiris & Tomasz Wieladek, 2012. "Does Macro-Pru Leak? Evidence from a UK Policy Experiment," NBER Working Papers 17822, National Bureau of Economic Research, Inc.
  7. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
  8. 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.
  9. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
  10. Allen Berger & Robert DeYoung & Mark Flannery & David Lee & Özde Öztekin, 2008. "How Do Large Banking Organizations Manage Their Capital Ratios?," Journal of Financial Services Research, Springer, vol. 34(2), pages 123-149, December.
  11. Alfredo Martín-Oliver, 2010. "From proximity to distant banking: Spanish banks in the EMU," Banco de Espa�a Working Papers 1008, Banco de Espa�a.
  12. Stiroh, Kevin J., 2000. "How did bank holding companies prosper in the 1990s?," Journal of Banking & Finance, Elsevier, vol. 24(11), pages 1703-1745, November.
  13. Myers, Stewart C., 1984. "Capital structure puzzle," Working papers 1548-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  14. Gabriel Jimenez & Steven Ongena & Jose-Luis Peydro & Jesus Saurina, 2012. "Credit Supply and Monetary Policy: Identifying the Bank Balance-Sheet Channel with Loan Applications," American Economic Review, American Economic Association, vol. 102(5), pages 2301-26, August.
  15. Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc.
  16. Alfredo Martín-Oliver & Sonia Ruano & Vicente Salas-Fumás, 2012. "Why did high productivity growth of banks precede the financial crisis?," Banco de Espa�a Working Papers 1239, Banco de Espa�a.
  17. Michael R King, 2010. "Mapping capital and liquidity requirements to bank lending spreads," BIS Working Papers 324, Bank for International Settlements.
  18. Myers, Stewart C, 1984. " The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-92, July.
  19. Repullo, Rafael & Suarez, Javier, 2003. "Loan Pricing Under Basel Capital Requirements," CEPR Discussion Papers 3917, C.E.P.R. Discussion Papers.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ijc:ijcjou:y:2013:q:1:a:8. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Timo Laurmaa).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.