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Wholesale Bank Funding, Capital Requirements and Credit Rationing

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  • Itai Agur

Abstract

This paper analyzes how different types of bank funding affect the extent to which banks ration credit to borrowers, and the impact that capital requirements have on that rationing. Using an extension of the standard Stiglitz-Weiss model of credit rationing, unsecured wholesale finance is shown to amplify the credit market impact of capital requirements as compared to funding by retail depositors. Unsecured finance surged in the pre-crisis years, but is increasingly replaced by secured funding. The collateralization of wholesale funding is found to expand the extent of credit rationing.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 13/30.

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Length: 22
Date of creation: 31 Jan 2013
Date of revision:
Handle: RePEc:imf:imfwpa:13/30

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Keywords: Banks; Capital; Bank credit; Credit restraint; Economic models; bank funding; deposit insurance; bank risk; collateralization; banking; bank capital; bank loan; risk taking; bank loan rates; bank liabilities; bank funding rates; bank creditors; bank charter; bank financing; bank profits; bank debt; bank lending; bank assets; bank risk-taking; capital regulation; bank risk taking; bank regulation; bank balance sheets; bank management; imperfect information; bank portfolios; excess demand; bank finance; risk aversion; bank borrowers; bank defaults; bank activities; moral hazard;

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References

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  1. Peek, Joe & Rosengren, Eric, 1995. "Bank regulation and the credit crunch," Journal of Banking & Finance, Elsevier, vol. 19(3-4), pages 679-692, June.
  2. Tobias Adrian & Hyun Song Shin, 2009. "Financial intermediaries and monetary economics," Staff Reports 398, Federal Reserve Bank of New York.
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  5. Claudio Borio & Haibin Zhu, 2008. "Capital regulation, risk-taking and monetary policy: a missing link in the transmission mechanism?," BIS Working Papers 268, Bank for International Settlements.
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  8. Charles Jacklin, 1993. "Bank capital requirements and incentives for lending," Working Papers in Applied Economic Theory 93-07, Federal Reserve Bank of San Francisco.
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  11. Agur, Itai & Demertzis, Maria, 2012. "Excessive bank risk taking and monetary policy," Working Paper Series 1457, European Central Bank.
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  18. Lown, Cara & Peristiani, Stavros, 1996. "The behavior of consumer loan rates during the 1990 credit slowdown," Journal of Banking & Finance, Elsevier, vol. 20(10), pages 1673-1694, December.
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Citations

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Cited by:
  1. Ignacio Lozano & Alexander Guarín, 2014. "Fragilidad Bancaria en Colombia: Un Análisis Basado en las Hojas de Balance," Borradores de Economia 813, Banco de la Republica de Colombia.
  2. Ignacio Lozano & Alexander Guarín, 2014. "Banking Fragility in Colombia: An Empirical Analysis Based on Balance Sheets," BORRADORES DE ECONOMIA 011145, BANCO DE LA REPÚBLICA.
  3. Oana Peia & Radu Vranceanu, 2014. "Optimal Return in a Model of Bank Small-business Financing," Post-Print hal-00952641, HAL.
  4. Riccetti, Luca & Russo, Alberto & Mauro, Gallegati, 2013. "Financial Regulation in an Agent Based Macroeconomic Model," MPRA Paper 51013, University Library of Munich, Germany.

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