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Impact of Bank Regulatory Capital Requirements: On Canadian Banks' Gross Loan Interest Rates

In: The Effect of Changes in Regulatory Capital Requirements on Bank Lending

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  • Berenger Piper

    (Business Science Institute & Macro Insight Research Hub)

Abstract

This chapter studied the impact of changes in regulatory capital requirements on the interest rates charged on gross loans offered by Canadian banks to the non-financial sector, using econometric methodologies. The study used a sample of annual financial statistics of Canadian financial institutions from 2012 to 2021, from Fitch Connect database, over the period of 2012 to 2021. The data also encompasses macroeconomic statistics from the Bank of Canada, BIS, and Economic Policy Uncertainty Research Group. The results found that increases in regulatory capital requirements did not impact loan interest rates during normal economic times, characterised with economic growth and expansion. The findings aligned with the results of Brei and Moreno (2019) who found that increases in regulatory capital requirements only led to increases in loan interest rates during times of large capital inflows, and not during normal economic times.

Suggested Citation

  • Berenger Piper, 2025. "Impact of Bank Regulatory Capital Requirements: On Canadian Banks' Gross Loan Interest Rates," Springer Books, in: The Effect of Changes in Regulatory Capital Requirements on Bank Lending, chapter 3, pages 45-70, Springer.
    • Handle: RePEc:spr:sprchp:978-3-032-02208-0_3
    DOI: 10.1007/978-3-032-02208-0_3
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