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Banks and capital requirements: Channels of adjustment

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  • Cohen, Benjamin H.
  • Scatigna, Michela

Abstract

Bank capital ratios have increased steadily since the financial crisis. For a sample of 101 large banks from advanced and emerging economies, retained earnings account for the bulk of their higher risk-weighted capital ratios, with reductions in risk weights playing a lesser role. On average, banks continued to expand their lending in real terms, though lending contracted among European banks. Lower dividend payouts and (for advanced economy banks) wider lending spreads have contributed to banks’ ability to use retained earnings to build capital. Banks that came out of the crisis with higher capital ratios and stronger profitability were able to expand lending more.

Suggested Citation

  • Cohen, Benjamin H. & Scatigna, Michela, 2016. "Banks and capital requirements: Channels of adjustment," Journal of Banking & Finance, Elsevier, vol. 69(S1), pages 56-69.
    • Handle: RePEc:eee:jbfina:v:69:y:2016:i:s1:p:s56-s69
    DOI: 10.1016/j.jbankfin.2015.09.022
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    References listed on IDEAS

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    More about this item

    Keywords

    Banks; Bank capital; Regulation; Capital ratios; Basel III;
    All these keywords.

    JEL classification:

    • 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

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