IDEAS home Printed from https://ideas.repec.org/a/boe/qbullt/0149.html
   My bibliography  Save this article

How might macroprudential capital policy affect credit conditions?

Author

Listed:
  • Rashmi Harimohan

    (Bank of England)

  • Benjamin Nelson

    (Bank of England)

Abstract

Macroprudential capital policy is designed to make the financial system more resilient and reduce the likelihood and severity of financial crises. In doing so, it can have an impact on credit conditions and economic growth more generally. This article considers the effects on credit conditions over the near term. The direction and magnitude of those effects are likely to depend crucially on the state of the financial system and the economy as well as the way in which banks, financial investors and borrowers respond to changes in macroprudential capital policy.

Suggested Citation

  • Rashmi Harimohan & Benjamin Nelson, 2014. "How might macroprudential capital policy affect credit conditions?," Bank of England Quarterly Bulletin, Bank of England, vol. 54(3), pages 287-303.
    • Handle: RePEc:boe:qbullt:0149
    as

    Download full text from publisher

    File URL: https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/how-might-macroprudential-capital-policy-affect-credit-conditions.pdf?la=en&hash=8FBA7481020046146A7033921A68284B15DB4D49
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Mr. Tümer Kapan & Ms. Camelia Minoiu, 2013. "Balance Sheet Strength and Bank Lending During the Global Financial Crisis," IMF Working Papers 2013/102, International Monetary Fund.
    2. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
    3. Francis, William B. & Osborne, Matthew, 2012. "Capital requirements and bank behavior in the UK: Are there lessons for international capital standards?," Journal of Banking & Finance, Elsevier, vol. 36(3), pages 803-816.
    4. David Miles & Jing Yang & Gilberto Marcheggiano, 2013. "Optimal Bank Capital," Economic Journal, Royal Economic Society, vol. 123(567), pages 1-37, March.
    5. Richard Button & Silvia Pezzini & Neil Rossiter, 2010. "Understanding the price of new lending to households," Bank of England Quarterly Bulletin, Bank of England, vol. 50(3), pages 172-182.
    6. Michael McLeay & Amar Radia & Ryland Thomas, 2014. "Money creation in the modern economy," Bank of England Quarterly Bulletin, Bank of England, vol. 54(1), pages 14-27.
    7. Prasanna Gai & Andrew G Haldane & Sujit Kapadia & Benjamin Nelson, 2013. "Bank Funding and Financial Stability," RBA Annual Conference Volume (Discontinued), in: Alexandra Heath & Matthew Lilley & Mark Manning (ed.),Liquidity and Funding Markets, Reserve Bank of Australia.
    8. Paul Tucker & Simon Hall & Aashish Pattani, 2013. "Macroprudential policy at the Bank of England," Bank of England Quarterly Bulletin, Bank of England, vol. 53(3), pages 192-200.
    9. Marc Farag & Damian Harland & Dan Nixon, 2013. "Bank capital and liquidity," Bank of England Quarterly Bulletin, Bank of England, vol. 53(3), pages 201-215.
    10. Julia Giese & Benjamin Nelson & Misa Tanaka & Nikola Tarashev, 2013. "Financial Stability Paper No 21: How could macroprudential policy affect financial system resilience and credit? Lessons from the literature," Bank of England Financial Stability Papers 21, Bank of England.
    11. Andrew Bailey & Sarah Breeden & Gregory Stevens, 2012. "The Prudential Regulation Authority," Bank of England Quarterly Bulletin, Bank of England, vol. 52(4), pages 354-362.
    12. David Aikman & Andrew G. Haldane & Benjamin D. Nelson, 2015. "Curbing the Credit Cycle," Economic Journal, Royal Economic Society, vol. 125(585), pages 1072-1109, June.
    13. Nick Butt & Alice Pugh, 2014. "Credit spreads: capturing credit conditions facing households and firms," Bank of England Quarterly Bulletin, Bank of England, vol. 54(2), pages 137-148.
    14. Brunner, Karl & Meltzer, Allan H., 1976. "The Phillips curve," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 1-18, January.
    15. Andrea Gerali & Stefano Neri & Luca Sessa & Federico M. Signoretti, 2010. "Credit and Banking in a DSGE Model of the Euro Area," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(s1), pages 107-141, September.
    16. Emma Murphy & Stephen Senior, 2013. "Changes to the Bank of England," Bank of England Quarterly Bulletin, Bank of England, vol. 53(1), pages 20-28.
    17. Jonathan Bridges & David Gregory & Mette Nielsen & Silvia Pezzini & Amar Radia & Marco Spaltro, 2014. "The impact of capital requirements on bank lending," Bank of England working papers 486, Bank of England.
    18. Shekhar Aiyar & Charles W. Calomiris & Tomasz Wieladek, 2014. "Does Macro‐Prudential Regulation Leak? Evidence from a UK Policy Experiment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(s1), pages 181-214, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Stephen Burgess & Oliver Burrows & Antoine Godin & Stephen Kinsella & Stephen Millard, 2016. "A dynamic model of financial balances for the United Kingdom," Bank of England working papers 614, Bank of England.
    2. Serena Merrino & Keagile Lesame & Ilias Chondrogiannis, 2024. "Macroprudential policy and credit allocation evidence from South Africa," Working Papers 11062, South African Reserve Bank.
    3. Ćehajić, Aida & Košak, Marko, 2021. "Macroprudential measures and developments in bank funding costs," International Review of Financial Analysis, Elsevier, vol. 78(C).
    4. Tamarah Shakir & Matthew Tong, 2014. "The interaction of the FPC and the MPC," Bank of England Quarterly Bulletin, Bank of England, vol. 54(4), pages 396-408.
    5. James Cloyne & Ryland Thomas & Alex Tuckett & Samuel Wills, 2015. "A sectoral framework for analyzing money, credit and unconventional monetary policy," Bank of England working papers 556, Bank of England.
    6. Emily Beau & John Hill & Tanveer Hussain & Dan Nixon, 2014. "Bank funding costs: what are they, what determines them and why do they matter?," Bank of England Quarterly Bulletin, Bank of England, vol. 54(4), pages 370-384.
    7. Adam Cagliarini & Fiona Price, 2017. "Exploring the Link between the Macroeconomic and Financial Cycles," RBA Annual Conference Volume (Discontinued), in: Jonathan Hambur & John Simon (ed.),Monetary Policy and Financial Stability in a World of Low Interest Rates, Reserve Bank of Australia.
    8. Rashmi Harimohan & Michael McLeay & Garry Young, 2016. "Pass-through of bank funding costs to lending and deposit rates: lessons from the financial crisis," Bank of England working papers 590, Bank of England.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tamarah Shakir & Matthew Tong, 2014. "The interaction of the FPC and the MPC," Bank of England Quarterly Bulletin, Bank of England, vol. 54(4), pages 396-408.
    2. Emily Beau & John Hill & Tanveer Hussain & Dan Nixon, 2014. "Bank funding costs: what are they, what determines them and why do they matter?," Bank of England Quarterly Bulletin, Bank of England, vol. 54(4), pages 370-384.
    3. de-Ramon, Sebastian J.A. & Francis, William B. & Harris, Qun, 2022. "Bank-specific capital requirements and capital management from 1989-2013: Further evidence from the UK," Journal of Banking & Finance, Elsevier, vol. 138(C).
    4. Xiong, Wanting & Wang, Yougui, 2017. "The impact of Basel III on money creation: A synthetic analysis," Economics Discussion Papers 2017-53, Kiel Institute for the World Economy (IfW Kiel).
    5. Xiong, Wanting & Wang, Yougui, 2018. "The impact of Basel III on money creation: A synthetic theoretical analysis," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 12, pages 1-34.
    6. Joseph Noss & Priscilla Toffano, 2014. "Estimating the impact of changes in aggregate bank capital requirements during an upswing," Bank of England working papers 494, Bank of England.
    7. David Martinez-Miera & Rafael Repullo, 2019. "Monetary Policy, Macroprudential Policy, and Financial Stability," Annual Review of Economics, Annual Reviews, vol. 11(1), pages 809-832, August.
    8. Noss, Joseph & Toffano, Priscilla, 2016. "Estimating the impact of changes in aggregate bank capital requirements on lending and growth during an upswing," Journal of Banking & Finance, Elsevier, vol. 62(C), pages 15-27.
    9. Marc Farag & Damian Harland & Dan Nixon, 2013. "Bank capital and liquidity," Bank of England Quarterly Bulletin, Bank of England, vol. 53(3), pages 201-215.
    10. Cohen, Benjamin H. & Scatigna, Michela, 2016. "Banks and capital requirements: Channels of adjustment," Journal of Banking & Finance, Elsevier, vol. 69(S1), pages 56-69.
    11. Kok, Christoffer & Gross, Marco & Żochowski, Dawid, 2016. "The impact of bank capital on economic activity - evidence from a mixed-cross-section GVAR model," Working Paper Series 1888, European Central Bank.
    12. Fabrizio Cadamagnani & Rashmi Harimohan & Kumar Tangri, 2015. "A bank within a bank: how a commercial bank’s treasury function affects the interest rates set for loans and deposits," Bank of England Quarterly Bulletin, Bank of England, vol. 55(2), pages 153-164.
    13. James Cloyne & Ryland Thomas & Alex Tuckett & Samuel Wills, 2015. "A sectoral framework for analyzing money, credit and unconventional monetary policy," Bank of England working papers 556, Bank of England.
    14. Paul Tucker & Simon Hall & Aashish Pattani, 2013. "Macroprudential policy at the Bank of England," Bank of England Quarterly Bulletin, Bank of England, vol. 53(3), pages 192-200.
    15. Natalya Martynova, 2015. "Effect of bank capital requirements on economic growth: a survey," DNB Working Papers 467, Netherlands Central Bank, Research Department.
    16. Simona Malovaná & Dominika Ehrenbergerová, 2022. "The effect of higher capital requirements on bank lending: the capital surplus matters," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 49(3), pages 793-832, August.
    17. Bert Loudis & Ben Ranish, 2019. "CECL and the Credit Cycle," Finance and Economics Discussion Series 2019-061, Board of Governors of the Federal Reserve System (U.S.).
    18. Peltonen, Tuomas A. & Gross, Marco & Behn, Markus, 2016. "Assessing the costs and benefits of capital-based macroprudential policy," Working Paper Series 1935, European Central Bank.
    19. Dominika Ehrenbergerová & Martin Hodula & Zuzana Gric, 2022. "Does capital-based regulation affect bank pricing policy?," Journal of Regulatory Economics, Springer, vol. 61(2), pages 135-167, April.
    20. Kanga, Désiré & Murinde, Victor & Soumaré, Issouf, 2020. "Capital, risk and profitability of WAEMU banks: Does bank ownership matter?," Journal of Banking & Finance, Elsevier, vol. 114(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:boe:qbullt:0149. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Publications Group (email available below). General contact details of provider: https://edirc.repec.org/data/boegvuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.