Advanced Search
MyIDEAS: Login to save this paper or follow this series

Norwegian banks in a recession: Procyclical implications of Basel II

Contents:

Author Info

  • Henrik Andersen

    ()
    (Norges Bank (Central Bank of Norway))

Registered author(s):

    Abstract

    While the new capital adequacy framework, Basel II, aims to make the banks’ capital requirements more sensitive to the underlying risk of the assets, it may also introduce an additional source of procyclicality in the banking sector. A growing share of the literature has assessed the potential cyclicality of Basel II. However, only parts of the banks’ assets have been considered. In addition, the cyclicality of the capital positions is usually left out of the calculations. This paper applies the stress testing framework of Norges Bank to analyse the cyclicality of capital positions and the cyclicality of Basel II capital requirements for the entire bank portfolio of Norwegian banks. We find a substantial increase in the calculated Basel II capital requirements in a recession scenario for the Norwegian economy. We also find a negative co-movement between capital positions and Basel II capital requirements. Hence, our analysis demonstrates that Basel II may introduce an additional source of procyclicality.

    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.norges-bank.no/en/Published/Papers/Working-Papers/2009/WP-20094/
    Download Restriction: no

    Bibliographic Info

    Paper provided by Norges Bank in its series Working Paper with number 2009/04.

    as in new window
    Length: 32 pages
    Date of creation: 13 Mar 2009
    Date of revision:
    Handle: RePEc:bno:worpap:2009_04

    Contact details of provider:
    Postal: Postboks 1179 Sentrum, 0107 Oslo
    Phone: +47 22 31 60 00
    Fax: +47 22 41 31 05
    Email:
    Web page: http://www.norges-bank.no/
    More information through EDIRC

    Related research

    Keywords: Basel II; procyclicality; capital positions;

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    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:bno:worpap:2009_04. 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: ().

    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.