Loan interest rates under risk-based capital requirements: The impact of banking market structure
This paper analyzes how the effects of the introduction of risk-based bank capital requirements on bank loan rates depend on the market structure of the banking industry. We show that, when granting loans to borrowers under Basel II or Basel III capital requirements, banks with market power internalize an additional cost, in terms of regulatory capital, associated with the increase of borrowers' risk of default. As a result, the intermediation margin on bank loans increases with the changeover from non-risk to risk-based capital requirements, thereby making lending more expensive.
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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jiménez, Gabriel & Ongena, Steven & Peydró, José Luis & Saurina, Jesús, 2007.
"Hazardous Times for Monetary Policy: What Do Twenty-Three Million Bank Loans Say About the Effects of Monetary Policy on Credit Risk?,"
CEPR Discussion Papers
6514, C.E.P.R. Discussion Papers.
- Jiminez, G. & Ongena, S. & Saurina, J., 2007. "Hazardous Times for Monetary Policy : What do Twenty-three Million Bank Loans Say about the Effects of Monetary Policy on Credit Risk?," Discussion Paper 2007-75, Tilburg University, Center for Economic Research.
- Patrick Slovik & Boris Cournède, 2011. "Macroeconomic Impact of Basel III," OECD Economics Department Working Papers 844, OECD Publishing.
- Dastidar, Krishnendu Ghosh, 1995. "On the Existence of Pure Strategy Bertrand Equilibrium," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 5(1), pages 19-32, January.
- Hannan, Timothy H., 1991. "Bank commercial loan markets and the role of market structure: evidence from surveys of commercial lending," Journal of Banking & Finance, Elsevier, vol. 15(1), pages 133-149, February.
- Jochen H. F. Güntner, 2009.
"Competition among banks and the pass-through of monetary policy,"
FEMM Working Papers
09035, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
- Güntner, Jochen H.F., 2011. "Competition among banks and the pass-through of monetary policy," Economic Modelling, Elsevier, vol. 28(4), pages 1891-1901, July.
- 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, 09.
- Andrea Gerali & Stefano Neri & Luca Sessa & Federico M. Signoretti, 2010. "Credit and banking in a DSGE model of the euro area," Temi di discussione (Economic working papers) 740, Bank of Italy, Economic Research and International Relations Area.
- Scharler, Johann, 2008.
"Do bank-based financial systems reduce macroeconomic volatility by smoothing interest rates?,"
Journal of Macroeconomics,
Elsevier, vol. 30(3), pages 1207-1221, September.
- Johann Scharler, 2006. "Do Bank-Based Financial Systems Reduce Macroeconomic Volatility by Smoothing Interest Rates?," Working Papers 117, Oesterreichische Nationalbank (Austrian Central Bank).
- Jeremy C. Stein, 1998.
"An Adverse-Selection Model of Bank Asset and Liability Management with Implications for the Transmission of Monetary Policy,"
RAND Journal of Economics,
The RAND Corporation, vol. 29(3), pages 466-486, Autumn.
- Jeremy C. Stein, 1995. "An Adverse Selection Model of Bank Asset and Liability Management with Implications for the Transmission of Monetary Policy," NBER Working Papers 5217, National Bureau of Economic Research, Inc.
- Patrick Bolton & Xavier Freixas, 2000.
"Corporate finance and the monetary transmission mechanism,"
Economics Working Papers
511, Department of Economics and Business, Universitat Pompeu Fabra.
- Patrick Bolton & Xavier Freixas, 2006. "Corporate Finance and the Monetary Transmission Mechanism," Review of Financial Studies, Society for Financial Studies, vol. 19(3), pages 829-870.
- Bolton, Patrick & Freixas, Xavier, 2001. "Corporate Finance and the Monetary Transmission Mechanism," CEPR Discussion Papers 2892, C.E.P.R. Discussion Papers.
- G. B. Gorton & Ping He, 2008.
"Bank Credit Cycles,"
Review of Economic Studies,
Oxford University Press, vol. 75(4), pages 1181-1214.
- Federico S. Mandelman, 2011. "Business Cycles and the Role of Imperfect Competition in the Banking System," International Finance, Wiley Blackwell, vol. 14(1), pages 103-133, 04.
- Inês Drumond, 2008.
"Bank Capital Requirements, Business Cycle Fluctuations and the Basel Accords: A Synthesis,"
FEP Working Papers
277, Universidade do Porto, Faculdade de Economia do Porto.
- Ines Drumond, 2009. "Bank Capital Requirements, Business Cycle Fluctuations And The Basel Accords: A Synthesis," Journal of Economic Surveys, Wiley Blackwell, vol. 23(5), pages 798-830, December.
- Marrouch, Walid & Turk-Ariss, Rima, 2012. "Bank pricing under oligopsony-oligopoly : Evidence from 103 developing countries," BOFIT Discussion Papers 1/2012, Bank of Finland, Institute for Economies in Transition.
- Berger, Allen N, 1995. "The Profit-Structure Relationship in Banking--Tests of Market-Power and Efficient-Structure Hypotheses," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(2), pages 404-31, May.
- Hülsewig, Oliver & Mayer, Eric & Wollmershäuser, Timo, 2009. "Bank behavior, incomplete interest rate pass-through, and the cost channel of monetary policy transmission," Economic Modelling, Elsevier, vol. 26(6), pages 1310-1327, November.
- Corvoisier, Sandrine & Gropp, Reint, 2001.
"Bank Concentration and Retail Interest Rates,"
Working Paper Series
0072, European Central Bank.
- Kishan, Ruby P & Opiela, Timothy P, 2000. "Bank Size, Bank Capital, and the Bank Lending Channel," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(1), pages 121-41, February.
- Jorge, José, 2009. "Why do bank loans react with a delay to shifts in interest rates? A bank capital explanation," Economic Modelling, Elsevier, vol. 26(5), pages 799-806, September.
- Hancock, Diana & Laing, Andrew J. & Wilcox, James A., 1995. "Bank capital shocks: Dynamic effects on securities, loans, and capital," Journal of Banking & Finance, Elsevier, vol. 19(3-4), pages 661-677, June.
- Liu, Guangling (Dave) & Seeiso, Nkhahle E., 2012. "Basel II procyclicality: The case of South Africa," Economic Modelling, Elsevier, vol. 29(3), pages 848-857.
When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:32:y:2013:i:c:p:602-607. 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: (Zhang, Lei)
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.