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Did Basel II Affect Credit Growth to Corporate Borrowers During the Crisis?

In: Financial Crisis, Bank Behaviour and Credit Crunch

Author

Listed:
  • Danilo V. Mascia

    (University of Cagliari)

  • Kevin Keasey

    (Leeds University Business School)

  • Francesco Vallascas

    (Leeds University Business School)

Abstract

The introduction of the risk-sensitive capital Accord, commonly known as Basel II, raised concerns among practitioners about possible increases in the procyclicality of capital charges during downturns. Based on a sample consisting of yearly observations for the period 2007–2012 and related to 76 countries, we test whether—throughout this period of financial distress—banks implementing Basel II reduce corporate lending growth more than banks adopting the first of the Basel Accords. Furthermore, we also test whether Basel II differently affects the growth of corporate loans according to bank size. Our analysis shows that banks, in general, that have complied with Basel II have not apparently reduced the growth of corporate loans. Interestingly, however, we find that the very largest banks decreased corporate lending growth by more than 3 % during the observed period, thus providing evidence of the above mentioned procyclicality issue affecting larger banks.

Suggested Citation

  • Danilo V. Mascia & Kevin Keasey & Francesco Vallascas, 2016. "Did Basel II Affect Credit Growth to Corporate Borrowers During the Crisis?," Contributions to Economics, in: Stefania P.S. Rossi & Roberto Malavasi (ed.), Financial Crisis, Bank Behaviour and Credit Crunch, edition 1, pages 83-94, Springer.
    • Handle: RePEc:spr:conchp:978-3-319-17413-6_6
    DOI: 10.1007/978-3-319-17413-6_6
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    Cited by:

    1. Cucinelli, Doriana & Battista, Maria Luisa Di & Marchese, Malvina & Nieri, Laura, 2018. "Credit risk in European banks: The bright side of the internal ratings based approach," Journal of Banking & Finance, Elsevier, vol. 93(C), pages 213-229.

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