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Did the EBA Capital Exercise Cause a Credit Crunch in the Euro Area?

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Listed:
  • Jean-Stéphane Mésonnier

    (Banque de France)

  • Allen Monks

    (Central Bank of Ireland)

Abstract

We exploit a unique monthly data set of euro-area bank balance sheets to document the impact of the EBA’s 2011/12 capital exercise on bank lending.We find that banks in a banking group forced to increase its CT1 capital ratio by 1 percent had an annualized loan growth (over nine months) that was 1.2 percent lower than that of banks in unconstrained groups. We also find at the country level that banks that did not have to recapitalize did not substitute for more constrained lenders. Our results are of particular relevance for the decisions facing the new European Single Supervisory Mechanism.

Suggested Citation

  • Jean-Stéphane Mésonnier & Allen Monks, 2015. "Did the EBA Capital Exercise Cause a Credit Crunch in the Euro Area?," International Journal of Central Banking, International Journal of Central Banking, vol. 11(3), pages 75-117, June.
    • Handle: RePEc:ijc:ijcjou:y:2015:q:3:a:2
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    More about this item

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • 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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