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Banks' regulatory capital buffer and the business cycle: Evidence for Germany

  • Stolz, Stéphanie
  • Wedow, Michael

This paper analyzes the effect of the business cycle on the regulatory capital buffers of German local banks in the period 1993-2004. The capital buffers are found to fluctuate countercyclically over the business cycle. The evidence supports that low-capitalized banks do not catch up with their well-capitalized peers over the observation period and they do not decrease risk-weighted assets during a recession. This finding suggests that their low capitalization does not force them to retreat from lending.

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Article provided by Elsevier in its journal Journal of Financial Stability.

Volume (Year): 7 (2011)
Issue (Month): 2 (June)
Pages: 98-110

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Handle: RePEc:eee:finsta:v:7:y:2011:i:2:p:98-110
Contact details of provider: Web page: http://www.elsevier.com/locate/jfstabil

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