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Bank capital (requirements) and credit supply: Evidence from pillar 2 decisions

Author

Listed:
  • Olivier De Jonghey

    (Corresponding author, CentER, European Banking Center, Tilburg University)

  • Hans Dewachter

    (National Bank of Belgium, Research Department, KULeuven)

  • Steven Ongenax

    (University of Zurich, SFI, CEPR)

Abstract

We analyze how time-varying bank-speci_c capital requirements a_ect banks' balance sheet adjustments as well as bank lending to the non-_nancial corporate sector. To do so, we relate Pillar 2 capital requirements to bank balance sheet data, a fully documented corporate credit register and _rm balance sheet data. Our analysis consists of three components. First, we examine how time-varying bank-speci_c capital requirements a_ect banks' balance sheet composition. Subsequently, we investigate how capital requirements a_ect the supply of bank credit to the corporate sector, both on the intensive and extensive margin, as well as for di_erent types of credit. Finally, we document how bank characteristics, _rm characteristics and the stance of monetary policy impact the relationship between bank capital requirements and credit supply.

Suggested Citation

  • Olivier De Jonghey & Hans Dewachter & Steven Ongenax, 2016. "Bank capital (requirements) and credit supply: Evidence from pillar 2 decisions," Working Paper Research 303, National Bank of Belgium.
    • Handle: RePEc:nbb:reswpp:201610-303
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    More about this item

    Keywords

    Capital requirements; credit supply; credit register; bank; regulation;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • 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
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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