The Cyclical Behavior of Bank Capital Buffers in an Emerging Economy: Size Does Matter
AbstractUsing a panel of Colombian banks and quarterly data between 1996:1 and 2010:3, we study the relationship between short-run adjustments in bank capital buffers and the business cycle. We follow a partial adjustment framework and control for several variables that have been identified as important determinants of bank capital buffers in previous studies, and find that bank capital buffers vary over the business cycle. We are able to identify a negative co-movement of capital buffers and the business cycle. However, we also find that capital buffers of small and large banks behave asymmetrically during the business cycle. While the former appear to be constant over time, once the appropriate set of control variables is used, the latter present a countercyclical behavior. Our results suggest the possible need of the implementation of regulatory policy measures in developing countries.
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Bibliographic InfoPaper provided by BANCO DE LA REPÚBLICA in its series BORRADORES DE ECONOMIA with number 008305.
Date of creation: 10 Apr 2011
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Bank capital buffers; Credit risk; Regulation; Colombia;
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- García-Suaza, Andrés Felipe & Gómez-González, José E. & Pabón, Andrés Murcia & Tenjo-Galarza, Fernando, 2012. "The cyclical behavior of bank capital buffers in an emerging economy: Size does matter," Economic Modelling, Elsevier, vol. 29(5), pages 1612-1617.
- Andrés Felipe García-Suaza & José E. Gómez-González & Andrés Murcia Pabón & Fernando Tenjo-Galarza, . "The Cyclical Behavior of Bank Capital Buffers in an Emerging Economy: Size Does Matter," Borradores de Economia 650, Banco de la Republica de Colombia.
- C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
- 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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