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Bank capital ratios in the 1990s: cross-country evidence

Author

Listed:
  • Gabe J. De Bondt

    (De NederIandsche Bank, Econometrie Research and Special Studies Department, Amsterdam (The NetherIands))

  • Henriette M. Prast

    (De NederIandsche Bank, Econometrie Research and SpeciaI Studies Department, Amsterdam and University of Amsterdam, FacuIty of Economics and Econometrics, Department of Economics, Amsterdam (The Netherlands))

Abstract

This study aims at assessing empirically the determinants of changes in risk-weighted bank capital ratios in the 1990s in Germany, France, Italy, the Netherlands, the UK and the US. Both bank-specific characteristics, factors at the banking industry level and the degree of undercapitalization are found to be relevant for bank capital ratios. The results suggest that in most cases either banks assess the risk of their portfolio as being higher than the outcomes generated by the Basel Capital Accord risk weighting scheme, or they need to take additional country- or bank-specific capital requirements into account when setting capital ratios. In all countries commercial banks face a downward pressure on their capital ratios due to an intensified competition. Finally, capital regulation seems to be effective in influencing bank capital ratios.

Suggested Citation

  • Gabe J. De Bondt & Henriette M. Prast, 2000. "Bank capital ratios in the 1990s: cross-country evidence," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 53(212), pages 71-97.
  • Handle: RePEc:psl:bnlaqr:2000:14
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    File URL: http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/10343/10248
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    References listed on IDEAS

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    1. Berger, Allen N, 1995. "The Relationship between Capital and Earnings in Banking," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(2), pages 432-456, May.
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    5. Joseph G. Haubrich & Paul Wachtel, 1993. "Capital requirements and shifts in commercial bank portfolios," Economic Review, Federal Reserve Bank of Cleveland, issue Q III, pages 2-15.
    6. Jacques, Kevin & Nigro, Peter, 1997. "Risk-based capital, portfolio risk, and bank capital: A simultaneous equations approach," Journal of Economics and Business, Elsevier, vol. 49(6), pages 533-547.
    7. Tolga Ediz & Ian Michael & William Perraudin, 1998. "The impact of capital requirements on U.K. bank behaviour," Economic Policy Review, Federal Reserve Bank of New York, issue Oct, pages 15-22.
    8. Rochet, Jean-Charles, 1992. "Capital requirements and the behaviour of commercial banks," European Economic Review, Elsevier, vol. 36(5), pages 1137-1170, June.
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    Citations

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    Cited by:

    1. Francesco D'Arack & Sandrine Levasseur, 2007. "The Determinants of Capital Buffers in CEECs," Sciences Po publications N°2007-28, Sciences Po.
    2. Juliusz Jablecki, 2009. "The impact of Basel I capital requirements on bank behavior and the efficacy of monetary policy," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Eastern Macedonia and Thrace Institute of Technology (EMATTECH), Kavala, Greece, vol. 2(1), pages 16-35, June.
    3. Rubi Ahmad & M. Ariff & Michael Skully, 2008. "The Determinants of Bank Capital Ratios in a Developing Economy," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 15(3), pages 255-272, December.
    4. Lin, Karen Lai Kai & Konishi, Masaru, 2013. "Capital requirements, bank behavior and fair value accounting: Evidence from Japanese commercial banks," Working Paper Series G-1-6, Hitotsubashi University Center for Financial Research.
    5. Gavalas, Dimitris, 2015. "How do banks perform under Basel III? Tracing lending rates and loan quantity," Journal of Economics and Business, Elsevier, vol. 81(C), pages 21-37.

    More about this item

    Keywords

    Bank; capital ratios; 1990s; US; UK; EMU;

    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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