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The Effect of Higher Capital Requirements on Bank Lending: The Capital Surplus Matters

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  • Dominika Kolcunová

    (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Opletalova 26, 110 00, Prague, Czech Republic
    Czech National Bank, Na Prikope 28, 115 03 Prague 1, Czech Republic)

  • Simona Malovaná

    (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Opletalova 26, 110 00, Prague, Czech Republic
    Czech National Bank, Na Prikope 28, 115 03 Prague 1, Czech Republic)

Abstract

This paper studies the impact of higher additional capital requirements on loan growth to private sector of banks in the Czech Republic. The empirical results indicate that there is a negative effect of higher additional capital requirements on loan growth of banks with relatively low capital surplus. In addition, the results confirm that the relationship between capital surplus and loan growth is important also in the period of stable capital requirements, i.e. it does not serve only as an intermediate channel of higher additional capital requirements.

Suggested Citation

  • Dominika Kolcunová & Simona Malovaná, 2019. "The Effect of Higher Capital Requirements on Bank Lending: The Capital Surplus Matters," Working Papers IES 2019/5, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Apr 2019.
    • Handle: RePEc:fau:wpaper:wp2019_05
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    3. Malovaná Simona & Tesařová Žaneta, 2022. "Banks’ Credit Losses and Provisioning over the Business Cycle: Implications for IFRS," Review of Economic Perspectives, Sciendo, vol. 22(1), pages 53-74, March.

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    More about this item

    Keywords

    Bank lending; banks’ capital surplus; regulatory capital requirements;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • 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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