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Cyclical Effects of Bank Capital Buffers with Imperfect Credit Markets: international evidence

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Listed author(s):
  • A. R. Fonseca
  • F. González
  • L. Pereira da Silva

Abstract

This paper analyzes the cyclical effects of bank capital buffers using an international sample of 2,361 banks from 92 countries over the 1990-2007 period. We find that capital buffers reduce the bank credit supply but – through what could be “monitoring or signaling effects” – have also an expansionary effect on economic activity by reducing lending and deposit rate spreads. This influence on lending and deposit rate spreads is more pronunced in developing countries and during downturns. The results suggest that capital buffers have a counter-cyclical effect in these countries. Our data do not suggest differences in the cyclical effects of capital buffers between Basel I and Basel II.

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File URL: http://www.bcb.gov.br/pec/wps/ingl/wps216.pdf
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Paper provided by Central Bank of Brazil, Research Department in its series Working Papers Series with number 216.

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Date of creation: Oct 2010
Handle: RePEc:bcb:wpaper:216
Contact details of provider: Web page: http://www.bcb.gov.br/?english

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  1. Agénor, P.-R. & Alper, K. & Pereira da Silva, L., 2012. "Capital requirements and business cycles with credit market imperfections," Journal of Macroeconomics, Elsevier, vol. 34(3), pages 687-705.
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  14. Lindquist, Kjersti-Gro, 2004. "Banks' buffer capital: how important is risk," Journal of International Money and Finance, Elsevier, vol. 23(3), pages 493-513, April.
  15. Meh, Césaire A. & Moran, Kevin, 2010. "The role of bank capital in the propagation of shocks," Journal of Economic Dynamics and Control, Elsevier, vol. 34(3), pages 555-576, March.
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  18. Stefan Kerbl & Michael Sigmund, 2009. "Quantifying the Cyclicality of Regulatory Capital – First Evidence from Austria," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 18, pages 93-103.
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Cited by:

  1. repec:ipf:finteo:v:39:y:2015:i:3:p:139-169 is not listed on IDEAS
  2. Agénor, P.-R. & Alper, K. & Pereira da Silva, L., 2012. "Capital requirements and business cycles with credit market imperfections," Journal of Macroeconomics, Elsevier, vol. 34(3), pages 687-705.
  3. Tabak, Benjamin M. & Takami, Marcelo & Rocha, Jadson M.C. & Cajueiro, Daniel O. & Souza, Sergio R.S., 2014. "Directed clustering coefficient as a measure of systemic risk in complex banking networks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 394(C), pages 211-216.

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