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Banks and capital requirements: channels of adjustment

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  • Benjamin H Cohen
  • Michela Scatigna

Abstract

Bank capital ratios have increased steadily since the financial crisis. For a sample of 94 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, though lending growth was relatively slower 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

  • Benjamin H Cohen & Michela Scatigna, 2014. "Banks and capital requirements: channels of adjustment," BIS Working Papers 443, Bank for International Settlements.
  • Handle: RePEc:bis:biswps:443
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    banks; bank capital; regulation; capital ratios; Basel III;

    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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